Question

The maximum tax rate of short-term gains held for one year or less is:

1) 20
2) 25
3) 30
4) 37
5) 28

Answer 1

Short-term capital gains are taxed at the same rate as ordinary income, with the maximum tax rate being 37%. This is due to the progressive nature of the U.S. federal income tax system, where tax rates increase with income levels.

Step-by-step explanation:

The maximum tax rate for short-term gains, which are gains on assets held for one year or less, is currently 37%. These short-term capital gains are taxed at the same rate as ordinary income. The progressive tax system in the United States means that as a taxpayer's income increases, so does their tax rate. Tax rates for ordinary income, including short-term capital gains, range from 10% to 37% for a single taxpayer depending on their income level.

It's important to note that the marginal tax rate system applies to annual income. For example, a single taxpayer with an annual income of $35,000 would be subject to a 10% tax on income from $0 to $9,075, 15% on income from $9,075 to $36,900, and their income above that would begin to be taxed at the next higher rate.