Capital Gains Taxation
How are gains from the sale of the taxpayer’s main home taxed?
Taxpayers may exclude up to $250,000 of gain on the sale of the home ($500,000 for married joint
filers), if they owned and used the homes as their principal residences for two out of the five years
before the sales. There is no limit to the number of times a taxpayer may claim this exclusion.
Can capital losses reduce ordinary income?
Up to $3,000 per year of capital losses can be deducted from ordinary income; losses over $3,000 are carried
forward to future tax years. Losses on personal use items, such as a home or car, are not deductible.
How do other states treat capital gains?
Nine states (Arkansas, Arizona, Hawaii, Montana, New Mexico, North Dakota, South Carolina, Vermont,
and Wisconsin) exclude a portion of long-term capital gains income, provide a lower rate, or allow a
credit. Massachusetts taxes short-term capital gains at a higher rate (12 percent) than long-term capital
gains. Of the states that impose individual income tax, 31 states including Minnesota do not provide
preferential treatment for capital gains income; some provide special treatment for capital gains income
from certain types of assets.
What are the income levels, filing types, and ages of Minnesota residents who
have capital gains income?
In tax year 2016, about 20 percent of all returns filed by Minnesota residents reported some capital gain
or loss. Married taxpayers filing joint returns reported 79 percent of capital gains income. Filers with
incomes over $100,000 reported about 86 percent of capital gains income. Over 40 percent of taxpayers
aged 65 and older reported some capital gains income in tax year 2016. The table shows the percent of
gains by age of taxpayer.
Federal adjusted
gross income
$ of capital gains
reported (millions)
% of all gains
reported
% of income consisting
of gains
Average gains
per return
Returns with capital gains
Less than $50,000 $649 8.4% 10.6% $2,834
$50,000 to $99,999 $431 5.6% 3.5% $3,490
$100,000 to $500,000 $2,208 28.7% 6.8% $14,561
Over $500,000 $4,413 57.3% 17.3% $234,437
All incomes $7,702 100.0% 10.1% $14,721
Taxpayer Age
Less than 25 $28 0.4% 6.5% $1,081
25 to 39 $434 5.6% 4.8% $5,897
40 to 64 $4,421 57.4% 9.5% $19,077
65 or older $2,818 36.6% 13.9% $14,692
All ages $7,702 100.0% 10.1% $14,721
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