Welcome Video Wealth Talk

Before we get into the details, here is the tl;dr version of today’s topic (and if you want to increase your money knowledge, come to my FREE live investing class I'm teaching Saturday morning.)

1. In 2025, everyone is entitled to a 0% tax rate on the first $15,750 of their income. This is called the standard deduction.

 2. There are two completely different tax rates in America. And this is one big reason the wealthy don’t pay taxes like the rest of us.

 3. It’s because of what is known as the 'Long term Capital Gains Tax Rate'. This tax rate only applies for investments that have been held for longer than a year in a brokerage account.

So now is a good time to introduce that there are two very different tax rates that the government uses to tax us: the Ordinary Tax Rate and the Long Term Capital Gains Tax Rate.

But before either of these tax rates apply, I want you to know that there is a 0% tax deduction that we are ALL entitled to getting on our income. This is knows as the standard deduction.

If you are a single filer or married filing separately, the first $15,750 you make in the year is taxed at a 0%. If you are married filing jointly, it’s actually the first $31,500 made that is taxed at 0%. 

Now that we understand the standard deduction, let’s talk tax rates.

The first rate (Ordinary Income Tax Rate) is for money that we make through active work in our jobs or businesses (through our blood, sweat and tears 😭). Again it doesn’t matter if it’s through a business or through a W2 job, this rate applies to all active work. Y’all, imo this rate really shows how much the government doesn’t care about the majority of us. đŸ˜©

So for some Taxes 101, basically our income is taxed like a staircase. The first money you make is taxed at a lower rate but the more you make, the more each additional dollar of income is taxed. This is also what’s known as the marginal tax rate. But looking at the picture you can see that the rate goes from 10% to 37%! This is just for federal taxes. We aren’t even talking state, medicare and social security taxes. Note: This is the same tax rate that our traditional 401k and IRAs are taxed at too when money is withdrawn from those accounts.

But you know what? The government decided to have a completely different tax rate for investments held in a brokerage account (or real estate). And this tax rate is called The Long Term Capital Gains Tax Rate.

Capital Gains is the money that our money makes (aka NOT through our blood, sweat and tears). This is passive investment income. And it’s taxed at an extremely favorable rate. (0%, 15%, and 20%) as long as the investments are held (not sold) for longer than a year. If the investments are sold in under a year, they are taxed using the ordinary income tax rate above. 

So now let’s compare these two tax rates. Same amount of money is taxed completely differently.

For example, say you were Married Filing jointly


Up to $96,700 of capital gains for married filing jointly ($48,350 for single filers) is taxed at 0% in 2025. And when you add the standard deduction, it's over six figures of investments that can be sold in one year - $128,200 for married filers - at a 0% tax rate! Wild isn't it?! 

This is one of the reasons why the wealthy don’t pay the same rate of taxes as the rest of us. Most of them are not getting their income from active work. They are living off of their investments. And if you play the game right, this can be you too.

This is why I say it’s so important to prioritize your investing education. Want to learn how to do this? Start HERE.

 

 

 

*For education only, not individual financial advice. Always consult a Tax professional to assess your specific tax needs.*

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