Capital Tax On

Nearly everything you own and use for personal or investment purposes is a capital asset, says the IRS.gov on their webpage about capital gains. Essentially, there can be a capital gain tax on nearly anything. Examples include your house, household decorations and furniture, and stocks or bonds in your personal account. When you put a capital asset up for sale, the difference between the amounts you sell it for and your basis - usually the price you paid for it - is the capital gain or capital loss. You have a capital gain if you have sold the asset for more than your basis. You have a capital loss if you have sold the asset for less than your basis. Capital loss from selling personal-use property - such as your home or car - are not deductible. If you got the asset as a gift or inherited it, take a look at Topic 703 on the IRS website for information about your basis.

Capital gains and losses are classified as long-term or short-term, depending on if you sold it after holding it for one year (long-term) or if you sold it before holding it for one year (short-term). Gains and deductible losses are reported on Form 1040, Schedule D, available in PDF on the IRS website. "If you have a net capital gain, that gain may be taxed at a lower tax rate than the ordinary income tax rates," explains IRS.gov. "The term "net capital gain" means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. Currently net capital gain is generally taxed at rates no higher than 15%, although, for 2008 through 2010, some or all net capital gain may be taxed at 0%, if it would otherwise be taxed at lower rates. There are three exceptions:

1. The taxable part of a gain from selling Section 1202 qualified small business stock is taxed at a maximum 28% rate.

2. Net capital gain from selling collectibles (such as coins or art) is taxed at a maximum 28% rate.

3. The part of any net capital gain from selling Section 1250 real property that is required to be recaptured in excess of straight-line depreciation is taxed at a maximum 25% rate."

Discuss It!

Most Popular Articles

More