Capital Gains and Losses – 10 Helpful Facts to Know

Capital Assets. Capital assets include property such as a home or a car. It also includes investment property, like stocks and bonds.

Gains and Losses. A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset.

Net Investment Income Tax. Taxpayers must include all capital gains in their income.

Deductible Losses. Taxpayers can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property they hold for their personal use.

Limit on Losses. If a taxpayer’s capital losses are more than their capital gains, they can deduct the difference as a loss on their tax return.

Carryover Losses. If a taxpayer’s total net capital loss is more than the limit they can deduct, they can carry it over to next year’s tax return.

Long and Short Term. Capital gains and losses are either long-term or short-term.

Net Capital Gain.  If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain.

Tax Rate. The tax rate on a net capital gain usually depends on the taxpayer’s income.

Forms to File. Taxpayers often will need to file Form 8949, Sales and Other Dispositions of Capital Assets. Taxpayers

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999.