Capital gains tax applies when you sell an asset for more than you paid for it. Typically, capital gains tax refers to investment gains, such as if you sell stock at a profit. While the federal government assesses a capital gains tax in all 50 states, some states, including New York, have their own capital gains tax as well. If you live in New York City, you'll face an additional city capital gains tax, on top of federal and state taxes.
New York State Capital Gains Tax
Like most states that tax capital gains, New York taxes capital gains at the same rate as ordinary income, such as your wages. New York taxes residents using an eight-bracket progressive tax system, where the tax rate increases along with taxpayer income. For single taxpayers, the tax rates on both regular income and capital gains are as follows:
- 4 percent for income up to $8,300;
- 4.5 percent for income from $8,301 to $11,450;
- 5.25 percent from $11,451 to $13,550;
- 5.9 percent for income from $13,551 to $20,850;
- 6.45 percent from $20,851 to $78,400;
- 6.65 percent for income from $78,401 to $209,250;
- 6.85 percent from $209,251 to $1,046,350;
- 8.82 percent for income of $1,046,351 or more.
For taxpayers filing jointly, these brackets roughly double. For example, the lowest 4 percent bracket extends for joint incomes up to $16,700, while the top bracket applies to incomes of $2,092,801 or more.
New York capital gains taxes are among the highest in the nation, with individual rates ranking 7th-highest as of 2013. Nine states don't have any capital gains taxes at all.
New York City Capital Gains Tax
New York City residents face an additional tax that ranges from 2.907 percent to 3.876 percent. Income and capital gains tax rates for New York City residents are as follows:
- 2.907 percent for single filers with income up to $12,000, or $21,600 for joint filers;
- 3.534 percent for single filers with income up to $25,000, or $45,000 for joint filers;
- 3.591 percent for single filers with income up to $50,000, or $90,000 for joint filers;
- 3.648 percent for single filers with income up to $500,000, same as with joint filers;
- 3.876 percent for single filers with income above $500,000 for all filers.
Federal Capital Gains Tax
The federal capital gains tax for investments held for one year or less is the same as the ordinary income tax rate. However, the federal rate drops for long-term capital gains, defined as those held for longer than one year. For most taxpayers, the federal long-term capital gains rate tops out at 15 percent, although the top rate does reach 20 percent. The 20 percent rate only applies to single filers with taxable income of over $406,750 and joint filers with income exceeding $457,600. Since New York treats capital gains as income, you are allowed to deduct your state and local tax on your federal return if you itemize your deductions.