Pennsylvania Capital Gains Tax

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Taxes are a fact of life for U.S. citizens, and it is no different in Pennsylvania.  Pennsylvania residents must pay taxes to the state of Pennsylvania and a separate tax to a local municipality. The biggest difference between federal and state income tax is that you cannot reduce your PA taxable income with itemized deductions or personal exemptions, while you can with the federal return.

One of the types of taxes that many people do not understand is the capital gains tax.  The capital gains tax in Pennsylvania is levied on the net gain from the sale of a personal asset. What does this mean? It means that you must pay a percentage of your profit in taxes.

If you have questions about whether you may owe capital gains tax or how much you may have to pay, an experienced attorney can help.

Capital gains taxes have been implemented because, when people make money off assets, they are not required to work for it and therefore do not have any payroll taxes taken out, such as Social Security or Medicare, to pay back into the system.

What Is Capital Gains Tax?

A capital gain is generally a profit. If you sell an asset for more than you paid for it, the difference between the sale price and the amount you paid for it is a capital gain.

The most common capital gains are from realizing shares as share prices rise, but they can also occur as a result of rises in land values or other assets such as art and antiques.

Pennsylvania state capital gains tax is a form of tax levied on the value an asset has gained over time. A capital gain occurs when you sell an asset for more than what you bought it for. For example, if you had bought apples for $1 and then sold them later for $2 each, that’s a capital gain of $1 per apple. They are levied at both the state and the federal level.

In Pennsylvania, any capital gains are taxed the same way as income, at a capital gains tax rate of 3.07%.

Who Should Pay Pennsylvania Capital Gains Tax?

There are a number of scenarios in which you may make a capital gain and have to pay tax on it in Pennsylvania:

  • Selling an asset that you have owned for more than 12 months: The most common way to make a capital gain, from selling shares or property that has been held for more than 12 months. Assets held for longer than 12 months are commonly known as long-term assets.
  • Selling an asset you have owned for less than 12 months: This is usually done to take advantage of the general upward trend in prices. However, if the market then turns downwards, capital losses may be made. These short-term gains cannot be offset against other income or costs.
  • Selling an asset that has been given to you: If you receive a gift of property and then sell it, any gain made on the sale is treated as income.
  • Selling an asset from your business: Any capital gain made from selling an asset from your business is subject to capital gains tax, as well as being subject to income tax as part of your business profits.

Is It Possible to Change the Amount of Capital Gains Tax?

You may be able to avoid paying capital gains tax on the sale of a home if:

  • You are a single filer, and the profit you made from the sale was $250,000 or less
  • You are married and filing jointly, and the profit you made from the sale was $500,000 or less

Don’t let your taxes add to your stress. Call a lawyer today to learn how we can assist.

(866) 691-5299