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<\/a>The term \u201ccapital asset\u201d for tax purposes applies to almost everything you own and use for personal or investment purposes. A capital gain or loss occurs when you sell a capital asset.<\/p>\n
Here are 10 facts from the IRS on capital gains and losses:<\/p>\n
1.\u00a0 Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. Capital assets include your home, household furnishings, and stocks and bonds that you hold as investments.<\/p>\n
2.\u00a0 A capital gain or loss is the difference between your basis of an asset and the amount you receive when you sell it. Your basis is usually what you paid for the asset.<\/p>\n
3.\u00a0 You must include all capital gains in your income.<\/p>\n
4.\u00a0 You may deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of personal-use property.<\/p>\n
5.\u00a0 Capital gains and losses are long-term or short-term, depending on how long you hold on to the property. 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.<\/p>\n
6.\u00a0 If your long-term gains exceed your long-term losses, the 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.\u2019<\/p>\n
7.\u00a0 The tax rates that apply to net capital gains are generally lower than the tax rates that apply to other types of income. The maximum capital gains rate for most people in 2012 is 15 percent. For lower-income individuals, the rate may be 0 percent on some or all of their net capital gains. Rates of 25 or 28 percent can also apply to special types of net capital gains.<\/p>\n
8.\u00a0 If your capital losses are greater than your capital gains, you can deduct the difference between the two on your tax return. The annual limit on this deduction is $3,000, or $1,500 if you are married filing separately.<\/p>\n
9.\u00a0 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\u2019s tax return. You will treat those losses as if they occurred that year.<\/p>\n
10.\u00a0Form 8949, Sales and Other Dispositions of Capital Assets, will help you calculate capital gains and losses. You will carry over the subtotals from this form to Schedule D, Capital Gains and Losses. If you e-file your tax return, the software will do this for you.<\/p>\n
For more information about capital gains and losses, see the Schedule D instructions or Publication 550, Investment Income and Expenses.<\/p>\n