Graham Stephan
Уровень B2· 780 слов
What's up, you guys? It's Graham here, and this is absolutely crazy. Believe it or not, President Trump just floated the idea of reducing or even outright eliminating the capital gains tax ahead of midterm elections. And I got to say, if that actually happens, we could see one of the biggest wealth transfers in
American history. After all, the United States hasn't lowered its capital gains tax in more than two decades. And the last time this happened, the S&P 500 went on to increase more than 70% over the following 4 years, eventually breaking through to new all-time highs.
That's why we really got to break down exactly what's happening, how this might also apply to homes under $2 million, and then most importantly, the chance of this actually passing. Because I have to say, if even part of this becomes law, the impact would be enormous. Although before we start, as usual, if you
appreciate the breaking news videos like this, it would mean the world to me if you capital gained that like button and subscribed if you haven't done that already. Yes, I don't like asking for it either, but it helps out tremendously.
And as a thank you for doing that, here's a picture of my SpongeBob cells from the first season that I've been collecting. So, thanks so much, and also a big thank you to Coveron for sponsoring this video, but more on that later. All right, so to start, we need to talk about capital gains tax. For
those unaware, a capital gain is just a profit for something you sold. Like you buy a stock for a thousand, sell it for five thousand, and all of a sudden you have a $4,000 capital gain that the IRS wants its piece of. However, the amount of tax that you pay all has to do with how long you've held the investment for.
And in this case, if you hold for less than a year, you pay what's called a short-term capital gain. With this, your investment doesn't get any special treatment. It's taxed at your ordinary tax rate, which goes up to 37%. But if you hold it for longer than a year, everything changes, and that's when you
get long-term capital gains. And when you look at the tax brackets, it's as 0% to 15% to 20% depending on how much money you make. In fact, these tax rates are so incredible that a married couple could realize up to $100,000 of capital gains and pay $0 to the IRS.
But, just like with anything, it does come with two catches. Number one, your capital gains stack on top of other income. So, if you have a job that pays you $90,000, that fills up the bracket from the bottom up, and then your gain sits on top of it. And then number two, if you make over $200,000 a year single
or $250,000 married, there's a 3.8 net investment tax, which gets added onto your capital gains tax rate, which means the top tax bracket's really more like 23.8% instead of 20%, and that threshold has not been updated since it passed in 2013. Thankfully though, this is what leads us to a new concept that's going
pretty viral online, and that would be indexing capital gains to inflation. See, here's the problem. When you calculate capital gains, the tax code generally doesn't adjust your original investment to inflation. So, if you invested $100,000 in 1990, and today it's worth $255,000, on paper it looks like a $155,000
gain. Congratulations. However, here's the crazy part. Believe it or not, because of inflation, $100,000 in 1990 had roughly the same purchasing power as $255,000 has today. So, in real terms, you basically just broke even after holding for 36 years, but on paper it looks like you've made a $155,000 of a profit that
