DEFINITION of 'Zero Capital Gains Rate'

The capital gains tax rate of 0% that is charged to individuals who sell property in an "enterprise zone". The zero capital gains rate can be applied by a given level of government in order to prompt investment in a given area.

BREAKING DOWN 'Zero Capital Gains Rate'

In 2004, the U.S. Congress passed, and the president approved, the Working Families Tax Relief Act. The act contains provisions that extend the 0% capital gains tax to certain properties being sold within the D.C. Enterprise Zone.

The logic behind this act is to give an incentive to individuals to invest in this area. The rate is not exclusive to any one region, state or municipality. Legislators looking to create jobs and draw investment into a community frequently enact a zero capital gains tax rate, and/or institute other tax-related incentives in that area

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