Capital Gains Tax in the US and Brazil: Differences

Understanding capital gains taxation is essential for Brazilians who invest or plan to invest in the United States. The rules vary considerably between the two countries-in structure, rates, exemptions, and timeframes-and not knowing them can result in significant tax surprises. For those who have assets in both countries or are considering an international move, tax planning is not a luxury but a practical necessity that directly impacts investment returns and wealth preservation. Brazil and the United States do not have a bilateral treaty to avoid double taxation, making a detailed understanding of each system even more relevant.

What Is Capital Gain

Capital gain is the positive difference between the sale price and the acquisition cost of an asset. This concept applies to a wide range of goods and rights, and the way each country calculates and taxes this gain follows different logics.

• Residential and commercial real estate
• Stocks and investment fund shares
• Equity interests
• Crypto assets
• Vehicles, works of art, and other movable goods

The positive difference between the sale price and the purchase price (adjusted according to local legislation) is considered capital gain and is subject to taxation. The impact of this tax varies significantly depending on the country, directly influencing investment returns and international wealth planning.

Taxation in Brazil

In Brazil, the tax on capital gains is regulated by the Federal Revenue Service and applies to the sale of goods and rights of any kind. The rates are progressive, based on the amount of gain obtained in the transaction.

For stock exchange transactions, specific rules apply: regular trades (swing trade) are taxed at 15%, while day trade transactions are taxed at 20%. The tax must be calculated and paid by the last business day of the month following the sale of the asset, under penalty of fines and interest.

Exemptions in Brazil

Brazilian legislation provides for exemption situations that deserve attention in wealth planning.

• Sole residential property: the sale of a residential property is exempt when the amount is reinvested in the purchase of another residential property in Brazil within 180 days, provided the benefit has not been used in the last five years
• Small value sales: sales of goods or rights up to R$ 35,000 per month are exempt from capital gains tax
• Stocks on the exchange: monthly sales of up to R$ 20,000 in regular trades are exempt for individuals

Taxation in the United States

The American capital gains tax system operates under a logic fundamentally different from the Brazilian one, distinguishing gains by the holding period of the asset. This distinction creates clear incentives for long-term investment strategies.

Short Term Versus Long Term

Short-term gains-from the sale of assets held for up to 12 months-are taxed as ordinary income. This means they are added to the taxpayer’s total income and taxed at the federal income tax brackets, which range from 10% to 37%.

Long-term gains-from assets held for more than 12 months-receive preferential treatment, with federal rates of 0%, 15%, or 20%, depending on the taxpayer’s income bracket. Higher-income taxpayers may also be subject to the additional Net Investment Income Tax (NIIT) of 3.8%, raising the maximum effective rate to 23.8% on long-term gains.

State Taxation

In addition to federal tax, many U.S. states levy their own capital gains tax. States such as Florida, Texas, Nevada, and Wyoming do not have state income tax, making them especially attractive to investors. In contrast, states like California may charge up to an additional 13.3% on capital gains.

For non-resident aliens, there are specific rules. The FIRPTA (Foreign Investment in Real Property Tax Act) requires withholding of 15% of the gross sale price on the sale of U.S. real estate by foreigners. The seller can later request a refund of the amount withheld that exceeds the actual tax due.

Brazil vs. USA Comparison

The structural differences between the two systems create tax scenarios that vary according to the type of asset, the value of the transaction, and the holding period. The table below summarizes the main comparison points.

A particularly relevant difference concerns the real estate exemption. In the U.S., the sale of a primary residence can generate an exemption of up to US$ 250,000 (individual) or US$ 500,000 (married filing jointly) on capital gains, provided the owner has lived in the property for at least two of the last five years. In Brazil, the exemption requires reinvestment in another residential property within 180 days.

FIRPTA and Non-Residents

For foreigners and non-resident aliens who own real estate in the United States, FIRPTA is a crucial law. This law requires that, on the sale of property by a non-resident, the buyer or closing agent must withhold 15% of the gross sale price and remit it to the IRS as an advance payment of the tax.

FIRPTA applies to anyone classified as a foreign person for tax purposes, including Brazilians who are not U.S. tax residents. The planning of the ownership structure-whether in personal name, via LLC, or via corporation-can significantly impact the application of FIRPTA and the total tax burden on the sale of the asset.

Absence of Bilateral Treaty

Brazil and the United States do not have a treaty to avoid double taxation, which means that, in theory, the same gain can be taxed in both countries. In practice, there are mitigation mechanisms that should be considered in planning.

• The U.S. offers the Foreign Tax Credit, allowing taxes paid abroad to be used as a credit against U.S. tax due
• Brazil allows the offsetting of taxes paid abroad in countries with which it maintains reciprocity of treatment, although practical application requires case-by-case analysis

The absence of a treaty significantly increases the complexity of tax planning for those who have assets in both countries. Consulting a professional specialized in international taxation is essential to structure operations efficiently and in compliance with both laws.

International Tax Planning

For Brazilians investing in the United States, some tax planning practices deserve special attention in day-to-day wealth management.

• Keep detailed records of acquisition cost and improvements in real estate assets, which can be deducted from capital gain on sale
• Consider the impact of exchange rate variation-in Brazil, the Federal Revenue Service requires calculations to be made in reais, which can create capital gain solely due to currency depreciation
• Evaluate the most appropriate ownership structure for each type of asset, considering tax implications in both countries
• Stay up to date on legislative changes, especially during periods of tax reform in either country

Efficient tax planning does not seek to avoid taxes, but rather to ensure that the taxpayer pays exactly what is due-no more, no less-legitimately taking advantage of the benefits and exemptions provided in each law. For those who move between Brazil and the United States with investments in both markets, this planning is the foundation of a sustainable wealth strategy.

About the author

Victoria Harper

Editor-in-Chief

Meet the author

As a journalist and lead editor at Visto n’ Visa, Victoria helps ensure that immigration topics are covered in a clear, trustworthy, and easy-to-understand way. Her focus is on delivering useful, human, and relevant content for people exploring new paths abroad.