Questions about Capital Gains come up every year at tax time.
Here are the top tax tips regarding Capital Gains for 2011.
This presentation is to aid and assist all our clients of Fresh Start Tax LLC.
Capital Gains and Losses from Tax Experts:
Capital Assets
Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When you sell a capital asset, the difference between the amount you paid for the asset and its sales price is a capital gain or capital loss.It is the net equity or profit IRS is concerned about.
Facts from the IRS about how gains and losses can affect your Federal Income Tax Return or 1040.
1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Bet you did not know that!
2. When you sell a capital asset, the difference between the amount you sell it for and your basis is usually what you paid for it. That is called a capital gain or a capital loss for income tax purposes.
3. You the taxpayer must report all capital gains.
4. You may only deduct capital losses on investment property, not on personal-use property.
5. Capital gains and losses are classified as long-term or short-term. If you hold the property more than one year, your capital gain or loss is long-term. If you hold it one year or less, the gain or loss is short-term.
6. If you have long-term gains in excess of your long-term losses, the difference is normally a net capital gain. Subtract any short-term losses from the net capital gain to calculate the net capital gain you must report.
7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2011, the maximum capital gains rate for most taxpayers is 15 percent.
For lower-income individuals, the rate may be 0 percent on some or all of the net capital gain. Rates of 25 or 28 percent may apply to special types of net capital gain.
8. If your capital losses exceed your capital gains, you can deduct the excess on your tax return to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year. A Break!
10. This year 2012, a new form, Form 8949, Sales and Other Dispositions of Capital Assets, will be used to calculate capital gains and losses.
You should use IRS Form 8949 to list all capital gain and loss transactions. The subtotals from this form will then be carried over to Schedule D (Form 1040), where gain or loss will be calculated.
Should you have any question or need professional tax representation call us today.
