Capital Gains and Losses Cassie Warren

Does capital gain count as income for that year on your taxes If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.

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.

Capital Gains A capital gain is what the tax law calls the profit you receive when you sell a capital asset, which is property such as stocks bonds mutual fund shares real estate. This does not include your primary residence. Special rules apply to those sales.

Breaking it down A capital gain is when the sale price of an asset is higher than the initial purchase price. Let’s say you buy a ring for $5,000 and sell it a year later for $6,000. The amount of capital gain is $1,000.

Capital Loss A capital loss is a loss on the sale of a capital asset such as a stock bond mutual fund real estate. As with capital gains, capital losses are divided by the calendar into short- and long-term losses.

Capital Gain Taxes The capital gains tax is different from almost all other forms of federal taxation in that it is relatively easy to avoid. Because people pay the tax only when they sell an asset they can legally avoid payment by holding on to their assets—a phenomenon known as the “lock-in effect.”

Investments that Capital Gains apply to stocks bonds mutual fund shares real estate.

Who and how to collect capital gain taxes IRS The IRS defines a capital asset as "almost everything you own and use for personal or investment purposes"

Different Types of capital gains Stocks are another asset that can be subject to capital gains tax. The capital gains tax on stocks is based on your tax bracket but it will either most likely be at 15% for many stock investors. Capital gains distributions as an asset has the benefit of always being taxed as a long term capital gain. Capital gains distribution taxes are the direct result of a mutual or stock payout. All income for corporations is taxed at the Federal Corporate tax rate. The only exception to this is Dividends which do have a separate rate.

Determining capital gains tax rates Capital gains are generally taxed at a preferential rate in comparison to ordinary income. This is intended to provide incentives for investors to make capital investments, to fund entrepreneurial activity, and to compensate for the effect of inflation and the corporate income tax. The amount an investor is taxed depends on both his or her tax bracket, and the amount of time the investment was held before being sold

Current Rate for capital gain taxes When it comes to capital gains rates in 2011, the plan is progressive in that those who have a higher earned income will pay a higher tax rate, but it's regressive in that those in the 15% tax bracket receive a larger rate hike compared to those who earn more. In 2010, those below the 25% income tax bracket paid no tax on capital gains while those who made more will pay 15%. In 2011, the poor will receive a tax increase of 10% on gains while the wealthier investors' rates will go up 5%.

Long-term Short-term capital gain Short-term capital gains are taxed at the investor's ordinary income tax rate, and are defined as investments held for a year or less before being sold. Long-term capital gains, which apply to assets held for more than one year, are taxed at a lower rate than short-term gains. In 2003, this rate was reduced to 15%, and to 5% for individuals in the lowest two income tax brackets

Who is affected by capital gains In the 1997 debate over the capital gains tax, opponents of a rate cut maintained that almost all of the benefits would go to high-income earners. That is true of the direct effects because high-income earners also earn most of the capital gains.

Capital Asset Capital assets are tangible property that is likely to remain in the possession of the owner for an extended period time. Generally, these more or less permanent assets are used to provide permanent housing for the owner, or are utilized as part of a revenue generating process, such as the operation of a business.

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