Taxation of Capital Gains and Dividends in the U.S.
Capital assets include property and investments such as real estate property, stocks, and bonds. When you sell a capital asset, the difference between the adjusted basis/cost in the asset and the amount you realized from the sale is a capital gain or a capital loss. You have a capital gain if you sell the asset for more than your adjusted cost, and you have a capital loss if you sell the asset for less than your adjusted cost.
In Israel, the capital gain rate is fixed at 25%, or 30% if you are a significant shareholder. it means that it doesn't matter the total amount of income you have from other sources, the tax rate will remain the same. In the U.S. this is not necessarily the case, and it depends if this is a long term or a short term gain, as explained below.
Short-Term or Long-Term
Capital gains and losses are classified as long-term or short-term. Generally, if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. There are exceptions to this rule.
Short-term capital gains are taxed according to the taxpayer's marginal tax bracket, which can vary between 10% and 37%. Long-term capital gains receive a preferred tax rate between 0% and 20%. The tax rate is 0% if your taxable income is less than $78,750. A capital gain rate of 15% applies if your taxable income is $78,750 or more but less than $434,550 for single; $488,850 for married filing jointly or $244,425 for married filing separately. A net capital gain tax rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate.
Capital losses and capital gains can be offset regardless of the duration of possession. The remainder will retain its nature - long term or short term.
Qualified Dividends
Dividends can be classified either as ordinary or qualified. Whereas ordinary dividends are taxable as ordinary income, at marginal tax rate, qualified dividends that meet certain requirements are taxed at lower long-term capital gain rates, as described above.
A qualified dividend must meet the following requirements:
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The dividends must have been paid by a U.S. corporation or a qualified foreign corporation.
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You meet the holding period - You must have held the stock for more than 60 days during the 121-day period that begins 60 days before the ex-dividend date. The ex-dividend date is the first date following the declaration of a dividend on which the buyer of a stock is not entitled to receive the next dividend payment. When counting the number of days you held the stock, include the day you disposed of the stock, but not the day you acquired it.