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Anyone planning to live in the United States or already residing in the country needs to understand how the capital gains tax works both in the US and in Brazil. This tax, which is levied on the profit obtained from the sale of assets and investments, has very different rules in each country – and not knowing them can result in costly tax mistakes. Brazilians with assets or investments in both jurisdictions are especially exposed to double obligations, making international tax planning essential for those crossing borders.
What Is Capital Gain
Capital gain is the positive difference between the sale price and the acquisition cost of an asset. This asset can be real estate, stocks, investment funds, equity interests, cryptocurrencies, or other goods and rights. Both Brazil and the United States tax this profit, but with very different logics, rates, and exemptions.
For Brazilians living in the US or holding investments in both countries, understanding these differences is crucial to avoid undue taxation and to take advantage of legal benefits available in each jurisdiction.
Rules in Brazil
In Brazil, the capital gains tax is regulated by the Receita Federal (Federal Revenue Service) and applies to the sale of assets and rights of any nature. The rates are progressive, varying according to the amount of gain obtained in the transaction.
Current Rates
- Up to R$ 5 million: 15%
- From R$ 5 million to R$ 10 million: 17.5%
- From R$ 10 million to R$ 30 million: 20%
- Above R$ 30 million: 22.5%
For transactions carried out on the stock exchange, specific rules apply: 15% for regular trades (swing trade) and 20% for day trades. The tax must be calculated and paid by the last business day of the month following the sale of the asset, and late payment results in fines and interest.
Exemptions in Brazil
- Sole residential property: sale with total reinvestment of the amount in another residential property in Brazil within 180 days
- Low-value assets: monthly sales of assets or rights up to R$ 35,000
- Stocks on the exchange: monthly sales up to R$ 20,000 in regular trades are exempt from the tax
Rules in the United States
The US tax system differentiates capital gains by the holding period of the asset, with distinct tax treatment for short-term and long-term transactions. This distinction is the main feature of capital gains taxation in the US.
Short and Long Term
- Short term (asset held for up to 1 year): the gain is taxed as ordinary income, with federal rates between 10% and 37%, according to the taxpayer’s income bracket
- Long term (asset held for more than 1 year): preferential rates of 0%, 15%, or 20% apply, depending on taxable income
This differentiation encourages long-term investment strategies and directly influences decisions to sell assets. In addition, high-income taxpayers may be subject to the Net Investment Income Tax (NIIT), an additional 3.8% surtax on net investment income.
State Taxation
In addition to federal tax, several US states levy state capital gains tax. States such as Florida, Texas, and Nevada do not have state income tax, which can be a significant advantage for investors. On the other hand, states like California and New York apply state rates that can exceed 10%, considerably increasing the total tax burden.
FIRPTA for Foreigners
Non-resident foreigners who sell real estate located in the United States are subject to FIRPTA (Foreign Investment in Real Property Tax Act), legislation that requires withholding at source on the transaction amount. In general, the withholding is 15% of the gross sale price, which may be adjusted according to specific circumstances. This mechanism should be considered in the planning of any real estate investment in the US by non-residents.
Main Differences
Brazil taxes capital gains with progressive rates based on the amount of the gain, while the US differentiates tax treatment by the holding period of the asset. In Brazil, the brackets range from 15% to 22.5% regardless of the holding period. In the US, long-term gains can be taxed at 0% for low-income taxpayers, but short-term gains can reach 37%.
Exemptions also follow different logics. In Brazil, the exemption for the sale of a sole residential property with reinvestment within 180 days stands out. In the US, individuals can exclude up to US$ 250,000 (or US$ 500,000 for couples filing jointly) of the gain on the sale of their primary residence, provided they have used the property as a home for at least two of the last five years.
The complexity of the American system is another relevant factor, as it combines federal and state rules and distinctions by tax status – resident, non-resident, US citizen, or green card holder – each with its own obligations and benefits.
Double Taxation
Brazil and the US do not have a bilateral treaty to avoid double taxation. This means that, in certain situations, a Brazilian resident in the US may be taxed in both countries on the same capital gain. The US system, however, offers the Foreign Tax Credit mechanism, which allows taxes paid abroad to be offset, in whole or in part, against the amount owed to the IRS.
Effective compensation depends on case-by-case analysis, considering the type of asset, the country where the gain was realized, and the rates applied in each jurisdiction. It is essential to have tax advice specialized in international legislation to avoid overpayment or non-compliance with tax obligations in either country.
Real Estate Capital Gain
Investing in real estate in the United States deserves special attention regarding capital gains. In addition to the regular rates differentiated by holding period, there is the 1031 Exchange mechanism, which allows deferral of capital gains tax by reinvesting the proceeds from the sale into another qualified investment property within the legal deadlines.
For Brazilians who own or are considering acquiring real estate in the US, it is essential to understand the tax obligations in both jurisdictions. In Brazil, assets held abroad must be declared to the Receita Federal by Brazilian tax residents. Proper structuring of the investment from the outset – including the choice between individual and corporate ownership – can result in significant tax savings over the years.
About the author
Victoria Harper
Editor-in-Chief
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.
