Investment Profit Contribution

Refer to Section 201 for tax-related definitions and exemptions, and see sections 204 (Long-Term Capital Gains Assessment) through 206 in the full text of the I-1600 initiative for further details.

Also see IRS topic for more info on Capital Gains.

After an exemption (see below), an 8.5% tax contribution will be assessed on Net Long-Term Capital Gains (LTCG), if the LTCG is over $15,000 (Section 203).

The tax will not apply to:

  • Home Sales
  • Farm Income
  • Retirement Accounts

Exemption Calculation = $15,000 – (LTCG x 0.25) (Exemption defined in section 201 item 18)

The exemption does not come into play for any LTCG above $60,000.

If the LTCG is $15,000 or less, the tax is not applied at all.

The Investment Profit Contribution will be assessed annually and submitted with the tax return.

Example

Mary is reporting a Net Capital Gains of $45,000 after selling stocks.

  • First, calculate the exemption: $45,000 x 0.25 = $11,250.
  • $15,000 – $11,250 = $3750 is the exemption amount.
  • $45,000 – $3750 = $41,250 is the non-exempt, taxable amount.
  • $41,250 x 8.5% = $3506.26

Mary would contribute $3506.26

More examples for illustration:

Long Term Capital Gains Contribution
$20,000 $850
$40,000 $2975
$60,000 $5100
$80,000 $6800
$100,000 $8500