Interest and capital gains are taxed differently in the United States in that
A)interest is exempt from state and local taxes.
B)interest is taxed as paid, but capital gains are taxed only when realized.
C)interest is taxed as paid, but capital gains are taxed as accrued.
D)capital gains when realized are exempt from state and local taxes.

Question

Quizplus · Accepted Answer

Interest is typically taxed as ordinary income, meaning it is taxed in the year it is received. Capital gains, on the other hand, are only taxed when the asset is sold or realized. This means that if an investor holds onto an investment that has appreciated in value, they can defer paying taxes on those gains until they sell the investment. Additionally, long-term capital gains (gains on investments held for longer than one year) are taxed at a lower rate than ordinary income. State and local taxes may still apply to both interest and capital gains.

Interest and Capital Gains Are Taxed Differently in the United