- Capital assets include property such as your home or car. They also include investment property such as stocks and bonds.
- A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
- You must include all capital gains in your income.
- You can deduct capital losses on the sale of investment property.
- Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.
- If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain.
- The tax rates that apply to net capital gains will usually depend on your income.
- If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or %1,500 if you are married and file a separate return.
- If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return.
- You must file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses.
Courtesy of the Internal Revenue Service Issue Number: IRS Tax Tip 2014-27.
Visit our website at www.Hoorfarlaw.com.