Almost everything you own and use for personal or
investment purposes is a capital asset. Examples include a home,
personal-use items like household furnishings, and stocks or bonds held as
investments. When a capital asset is sold, the difference between the basis
in the asset and the amount it is sold for is a capital gain or a capital
loss.You have a capital gain
if you sell the asset for more than your basis. You have a capital loss if
you sell the asset for less than your basis. Losses from the sale of
personal-use property, such as your home or car, are not deductible.Capital gains and losses are classified as
long-term or short-term. If you hold the asset for more than one year before
you dispose of it, your capital gain or loss is long-term. If you hold it
one year or less, your capital gain or loss is short-term. To determine how
long you held the asset, count from the day after the day you acquired the
asset up to and including the day you disposed of the asset.
Capital gains and deductible capital losses are
reported on Form 1040, Schedule D, Capital Gains and Losses, and on Form
8949, Sales and Other Dispositions of Capital Assets. If you have a net
capital gain, that gain may be taxed at a lower tax rate than your ordinary
income tax rates. 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 for the year. The term "net long-term capital gain" means
long-term capital gains reduced by long-term capital losses including any
unused long-term capital loss carried over from previous years. Generally,
for most taxpayers, net capital gain is taxed at rates no higher than 15%.
Some or all net capital gain may be taxed at 0% if you are in the 10% or 15%
ordinary income tax brackets. However, beginning in 2013, a new 20% rate on
net capital gain applies to the extent that a taxpayer’s taxable income
exceeds the thresholds set for the new 39.6% ordinary tax rate ($400,000 for
single; $450,000 for married filing jointly or qualifying widow(er);
$425,000 for head of household, and $225,000 for married filing separately).
There are a few other exceptions where capital
gains may be taxed at rates greater than 15%.
First, the taxable part of a gain
from selling section 1202 qualified small business stock is taxed at a
maximum 28% rate. Second, net
capital gains from selling collectibles (like coins or art) are taxed at a
maximum 28% rate. Third, the
portion of any unrecaptured section 1250 gain from selling section 1250 real
property is taxed at a maximum 25% rate. Note that net
short-term capital gains are subject to taxation at your ordinary income tax
rate.If you have a taxable
capital gain, you may be required to make estimated tax payments.
However, if your capital losses
exceed your capital gains, the amount of the excess loss that can be claimed
is the lesser of $3,000, ($1,500 if you are married filing separately) or
your total net loss as shown on line 16 of the Form 1040, Schedule D. If
your net capital loss is more than this limit, you can carry the loss
forward to later years.
Almost everything you own and use for personal or
investment purposes is a capital asset. Generally, for most taxpayers, net capital gain
is taxed at rates no higher than 15%. If you sell capital assets you may have capital gains
which may be taxed at rates greater than
15% such as when the taxable part of a gain from selling section
1202 qualified small business stock is taxed at a maximum 28% rate. Also net
capital gains from selling collectibles (like coins or art) are taxed at a
maximum 28% rate. Another situation
