by Kristin P. Sinclair – A Accu Tax – January 13, 2020
Normally when you sell a capital asset it results in a capital gain or capital loss. A capital asset includes most property you own for personal use, or that you own as an investment. The following are a few things the IRS suggests you know so that you can better understand your capital gains and losses:
Capital Assets include property such as your home or car; as well as investment property, which might include real estate precious jewelry, mutual funds, or stocks and bonds.
Gains and Losses are the difference between your cost basis and the amount you receive when you sell an asset. Normally your cost basis is what you paid for your capital asset plus any improvement costs.
Net Investment Income Tax Applies to certain net investment income for individuals, estates, and trusts at a rate of 3.8% for those with income above the statutory thresholds.
Deductible Losses may apply to capital losses on the sale of investment property. You cannot deduct losses on the sale of capital assets that you hold for personal use.
Limit on Losses apply to your capital losses if the losses are more than your capital gains for that same tax year. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
Carryover Losses are normally permitted for those losses that exceed your total net capital loss in any one tax year. You should be able to carry that excess loss over to the next year’s tax return.
Long and Short Term capital gains and losses are treated as either long-term or short-term. Your length of ownership of the capital asset determines long or short. If you held the capital asset for one year or less, the gain or loss is short-term. Otherwise, it is a long-term capital gain or loss.
Net Capital Gain occurs when your long-term gains are more than your long-term losses. That difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.
Tax Rate on a net capital gain usually depends on your income. Your maximum tax rate on a net capital gain is 20 percent. Please note that for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gains.
There’s still may be time to review your 2018 capital gain or loss scenario. Please phone Kristin today at (803)329-0615 and see how she might help you with your 2014 tax return.
Updated by Kristin P. Sinclair: A Accu Tax
in Charlotte NC and Rock Hill SC
January 13, 2020 (803)329-0609
KPS: More information is available at IRS.gov.
See Publication 590-A and Publication 590-B.