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A capital gains tax is incurred when a capital asset is sold for a profit. Conversely, a capital asset sold for a loss represents a capital loss. The term "capital asset" is defined in the Internal Revenue Code as business or nonbusiness property held by a taxpayer, other than 8 specific categories of assets that are excluded from treatment as capital assets. The most notable exceptions are business inventory, depreciable business personal property and business real property, and copyrights, literary, musical, or artistic compositions created by the taxpayer.
The capital gains tax is imposed on capital gains incurred during a taxable year. Thus, gain from the sale of a capital asset is not reported on the income tax return as income. It is reported in a different section of the return. While the policy may be debatable, the tax rates for capital gains are lower than the tax rates for ordinary income. Capital losses can be used to offset capital gains, but they are not deductible from ordinary income.
Examples of capital assets are a personal residence and any nonbusiness real property, stocks and bonds, automobiles, boats, jewelry, and nonbusiness personal property. Theses are common assets are regularly bought and sold. Thus, while the advice of a tax attorney or CPA may be desirable, all lay persons can have a basic understand of the taxation of capital gains and, perhaps more important in today's economy, capital losses. -
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Capital Gains Tax Questions
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How does the capital gains tax work? 2 Answers1)How does capital gain tax work? # Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. # When you sell a ca... read more -
What is the cheapest way to do taxes online? Need to include capital gains like stocks too! 1 AnswerI have been using Tax Act for several years now. Ferderal tax preparation is free and the package that allowed me file electronically and prepared my state retu... read more -
Why is my name capitalized on all banking/tax forms? 1 AnswerThe reason is much less sinister. Using all capital letters makes a name (and address, for that matter) easier to read, and prevents spelling and capatilization... read more -
My mutual fund tanked in this economy but apparently it accrued capital gains! Read on...Please HELP! 7 AnswersThis is not very unusual when the market is going badly. As customers rush to take money out of the fund, the fund is forced to sell assets. Based on FIFO (Firs... read more
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Capital Gains Tax Effect on Investment | Moneyhelpyou http://cli.gs/amzhR
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Are my recent dividend reinvestments taxed at the short term or long term capital gains tax rate? - http://tinyurl.com/yb4757p
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RT @Lordvortex $ES_F . . . tax has me nervous.==> so: Commision fees; interest on margin; dividend taxes; capital gains; etc, not enough?$$
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Real Estate, The Federal Tax Code allows married taxpayers to exclude from capital gains taxes up to $500,000 in profits http://bit.ly/INBW9
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Notice how all the people who are against a capital gains tax, always say it won't stop property bubbles, and compares us with Australia.
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