Older Taxpayers Earn Lion’s Share of Capital Gains Income

Yesterday, we reported on some new IRS data showing the distribution of dividend income by age group. Today, we have a similar set of data on capital gains income by age group. As is the case with dividend income, it is clear that older taxpayers earn the lion's share of capital gains income and that allowing the current 15 percent tax rate on capital gains income to rise to 20 percent in 2011 (and to 23.8 percent on some gains in 2013) will disproportionately hurt older Americans.

As the table below shows, while 6 percent of all tax returns reported some capital gains income, 13 percent of taxpayers over age 65 reported capital gains income. Indeed, one-third of all taxpayers reporting capital gains income are over age 65 and they earn 30 percent of all capital gains income. Capital gains income comprises 12 percent of their total adjusted gross income.

The table also shows that capital gains income is not concentrated solely on the over 65 set. Indeed, 40 percent of taxpayers reporting capital gains income are between the ages of 45 and 65 – those building up to retirement – and they earn nearly half of all capital gains income.

These statistics help put a face on taxpayers who will be impacted by higher taxes on capital gains income. Something lawmakers should consider as the expiration of the Bush tax cuts nears at the end of 2010.