What is a Capital Gains Tax?
A capital gains tax is an amount of tax that becomes due when a capital asset generates some sort of profit. Gains can be realized when capital assets are sold for a higher price than was originally paid for the assets, or when the assets generate some sort of increased value, such as in the way of interest. The amount of capital gains tax is based on the increase in the worth of the asset, not in the total value, which would include the initial cost of acquiring the asset. Because the capital gains tax is associated with the total amount of capital gains accrued by an organization, it is possible for an investor to offset the gains of one asset by incurring a loss on another asset. It is the total profits that are used to determine how much capital gains tax is due for a given period. A capital gains tax can apply to any type of capital asset. In the event that properties such as land and buildings are sold at a profit, a capital gains tax will apply. The only exception to this rule i
The Internal Revenue Service explains: “Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.” When you sell an asset for a profit, that profit margin is your capital gain, and the IRS taxes you on it. Capital gains taxes vary depending on the income level of the tax filer and the length of the investment, with separate tax rates for short-term vs. long-term capital gains. Here’s what the e-mail says about capital gains taxes: “CAPITAL GAINS TAX MCCAIN 15% (no change) OBAMA 28% CLINTON 24%” “How does this affect you?” the e-mail asks. “If you sell your home and make a profit, you will pay 28% of your gain on taxes. If you are heading toward retirement and would like to down-size your home or move into a retirement community, 28% of the money you make from your home will go to taxes. This proposal will adversely affect the elderly who are counting on the income from their homes as part of their retirement income.” The item lists 15 percent a
If a taxpayer realizes both capital gains and capital losses in the same year, a taxpayer’s capital gains may be offset by any capital losses. If a taxpayer’s capital gains exceed capital losses, the taxpayer is left with a net capital gain that will be subject to capital gains tax. If a taxpayer’s capital losses exceed capital gains, the taxpayer may be able to claim a tax deduction of up to $1,500 ($3,000 for married taxpayers filing a joint return). If a taxpayer experiences a net capital loss that exceeds this amount, the loss may be carried forward and the taxpayer may claim a deduction in later years.
