Capital gains tax is a tax on income received from the sale of an asset—such as a business, real estate, your home, stocks, bonds, coin collections, and jewelry. Capital gains tax is paid on the financial gain between the amount you paid for (or invested to build) the asset, and the amount for which it is sold.
The rate (percentage) paid as capital gains tax has traditionally been lower than the rate (percentage) paid on income tax. And the Internal Revenue Service (IRS) has traditionally taxed long term gains differently than short term gains—with the distinction based on how long the taxpayer owned or held the asset.
In Maryland, capital gains tax is applied to income from the sale of assets such as businesses, real estate, stocks, and other valuable items. Capital gains are the profits realized from the sale of these assets, which is the difference between the purchase price and the selling price. The tax rate for capital gains is typically lower than the regular income tax rate. The Internal Revenue Service (IRS) distinguishes between short-term and long-term capital gains for tax purposes, with long-term gains usually being taxed at a lower rate. Short-term capital gains apply to assets held for one year or less, while long-term gains apply to those held for more than one year. Maryland follows the federal tax treatment for capital gains, meaning that Maryland taxpayers must report capital gains on their state tax return and the gains are subject to state income tax in addition to federal taxes. It's important to consult with an attorney or tax advisor to understand the specific implications for individual situations, as there may be exemptions or additional considerations, such as the primary residence exclusion.