Capital is a unique term when it comes to taxes. If it gains
value, you pay a tax. If it loses it, you can write at least some of the loss
off.
Practically everything you own is a capital asset. This is
true whether you use it for business purposes or personal use. The internal
revenue service is very interested in your capital assets. Why? The IRS likes
to tax the full gains while sometimes only giving you a small break on loss.
Specifically, you have to report and pay taxes on recognized gains of your
capital assets when you sell them. Unfortunately, you only get to claim a loss
on capital assets if it is an investment such as stocks. Doesn’t seem fair, but
that is how the cookie crumbles these days!
Here are some tax issue highlights on capital assets:
1. Generally, you report gains and losses on capital assets
by subtracting the price you purchased it for from the price you sold it for.
This calculation is reported to the IRS on Schedule D, which should be attached
to your 1040
tax return.
2. Capital gains and
losses are classified as long-term or short-term. The classification breaks
down on, how long you’ve owned the capital asset in question before selling it
to someone else. If it has been less than a year, it is a short-term gain or
loss. Hold on to it for more than a year and you are looking at a long-term
gain or loss when reporting taxes. Each classification requires different tax
calculations and you will ultimately pay different amounts of tax.
3. In a bit of good news, you are generally going to pay less tax on
a long term capital asset gain. For the
2012 tax year, the tax rates range to 20 percent.
4. While the IRS is happy to tax all of your capital gains,
it has different views towards losses. You can deduct capital losses, but only
up to $3,000 each year.
No comments:
Post a Comment