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What are the 10 things to know about Capital Gains & Losses?


Any kind of investments deals with capital gains/ or losses. If you’re going to invest (whether it’s in stocks, real estate or even rare stamps), you have to understand capital gains. And eventually, it doesn’t matter whether you win or lose, you can always acquire knowledge about this intricate subject of tax code.

This page provides you with information on your capital gains estimate for the year 2012.  With this Capital-Gains Tax Estimator you can easily figure out a rough estimate of the gains or losses you can hit this year. This also works as a  good strategizing tool to use when you’re weighing whether or not to sell some shares right now or later this year.

In order to get this tax code work in your favour, this article brings more information to you. The first step is to understand at which rate sales are taxed.  This theory depends on your income from other sources, plus the entire time duration you held the asset while determining the type of asset. There’s a lot to keep track of:  Ordinarily the short-term gains are taxed as ordinary income. On the other hand, the taxes on long-term gains (for assets held more than one year) may range from 0% to 28%.

Initially, you should be able to determine the different rates correctly and thus you would be ready to use strategies on the basis of your losses and thus elevate the chances for achieving gains. To do so, you need to calculate your net loss or gain.

This article entails the calculated which is regulates the 2011 tax year sales of traditional investments that may include stocks, bonds and mutual funds. And this worksheet is aims at offering enough information on your bill.

If you have invested in collectibles (which are taxed at a maximum rate of 28%) or if it is a real-estate investment (which are sometimes taxed at 25%), you are required to adjust the calculator’s output by hand that too after following the precise rules for that type of asset. Despite the fact that this system provides you with the tax information in most of the circumstance, it wouldn’t be useful in scenarios where you are subject to the alternative minimum tax, or AMT.

Listed below are the ten facts from the IRS which will throw some more light on the gains and losses and their impact on the Federal income tax return.

  1. A capital asset can be grouped as all the personal belongings you may use for personal purposes, pleasure or investment.
  2. Capital gain or loss can be depicted by the amount received on the sale of a capital asset (which is again the difference between the amount you buy it and then sell it for).
  3. You must report all capital gains.
  4. The capital losses can be deducted exclusively from your investment property and not from your personal property.
  5. Capital gains and losses are categorized into long-term or short-term. They are grouped into these two categories depending upon the length of time the asset is held by you before selling. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
  6. Another interesting feature of a long-term capital gain is if you have long-term gains in excess of your long-term losses, you have earned a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.
  7. Interestingly, the tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For instance, in the year 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain.
  8. Depending upon the situation, a capital loss can also sometimes exceed the capital gains. This excess in capital loss can be deducted on your tax return. This tax deduction is focused on other income such as wages. 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.
  9. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
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