Submitted By: Valerie
Answered: October 29, 2013 8:30 am

I sold a collectible this year and I’m trying to figure what the tax rate will be on my gain. Is it my tax bracket (15%) or the rate for collectibles gain (28%)?

The special capital gain rates are supposed to allow taxpayers to pay less tax on these gains than on ordinary income. Thus, the special 28% capital gains rate for collectibles applies for taxpayers in the 28%, 33%, 35%, or 39.6% tax bracket; the rate for those in the 10%, 15%, or 25% bracket is effectively the same as the rate on ordinary income. The reason: The capital gains rate is the maximum rate; it cannot exceed the overall rate paid by a person on taxable income. Of course, the collectible gain part of taxable income and can raise the tax bracket for an individual (yours may be higher than 15% after including the collectible gain in income).

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Tax Glossary

Installment sale

A sale of property that allows for tax deferment if at least one payment is received after the end of the tax year in which the sale occurs. The installment method does not apply to year-end sales of publicly traded securities. Dealers may not use the installment method. Investors with very large installment balances could face a special tax.

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