Capital Gain and Loss Facts: A Top Ten List

A , including personal property and investments, can be sold for either a loss or a gain. If you sell your assets, you should be aware of the following ten facts regarding :

  1. Assets: describe property you own, like a home or a vehicle. The term also encompasses investments, such as stocks and bonds.
  2. Loss and Gain: A is the positive difference between the base cost of the asset and the sale price. The basis is generally set at what you originally paid for the asset. A loss is considered when the difference is less than the basis.
  3. Tax: Capital gains are included in your income, which may make you subject to the . The 3.8% tax is applicable on certain incomes related to estates and individuals with about a statutory threshold.
  4. : Investment property sold for a can warrant you a deduction of the loss amount. However, property that you kept for personal use can’t be claimed for a loss deduction.
  5. Terms: depending on how long you held the property, gains or losses can be either short-term or long-term. Any asset held for more than one year is considered long-term. Anything less would be classified as short term.
  6. Net Capital Gain: You’re considered to have net capital gain when the long-term gains are more than your net short-term losses.
  7. Taxation Rate: is applied based on your income. The highest net is 20%, though typically taxpayers receive a rate of zero or 15%. Depending on certain types of net capital gains, the maximum rate can raise up to 25% or 28%.
  8. Loss Limit: If capital losses equal more than any capital gains, you are able to deduct the difference at tax time. However, the loss is limited to $3,000 each year ($1,500 married, filing separately).
  9. Carryover Losses: Once you reach the limit that you are eligible to deduct of your total net capital loss, you are able to carryover the loss to the following year’s tax return. You just assume the loss as though it happened during that specific tax year.
  10. Forms: You will likely have to file Form 8949, Sales and Other Dispositions of Capital Assets when you file your tax return. This way, you can report yours sales of any assets. In addition, you may need to file Schedule D, Capital Gains and Losses.