Capital Gains and Losses

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. The IRS says that when you sell a capital asset, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may subtract only your capital losses on investment property, not personal property.

Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. 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.

Report your short-term and long-term capital gains and losses on Form 1040, Schedule D, "Capital Gains and Losses." If you have a taxable capital gain, you may be required to make estimated tax payments. See Publication 505, "Tax Withholding and Estimated Tax," for additional information on estimated tax.

The maximum tax rates on net capital gain have been reduced for most sales and exchanges after May 6, 1997. For more information on the maximum tax rates, refer to Publication 544, "Sales and Other Dispositions of Assets."

If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately). If your net capital loss is more than this limit, figure the amount of loss that can be carried forward to later years by using the Capital Loss Carryover Worksheet in the instructions for Schedule D.

Contact your tax preparer for additional assistance with capital gains and losses.


This daily Tax Tip has been provided by the Internal Revenue Service.

You may like these other stories...

Starting in January 2015, the IRS will limit the number of refunds that are electronically deposited into a single financial account or pre-paid debit card to three, as part of the agency’s effort to crack down on...
House proposes $10.5B, eight-month highway billThe House Ways and Means Committee proposed a transportation funding bill on Tuesday that calls for a temporary extension of current transportation funding levels until May 31,...
Swiss banks threaten freeze on US accounts over tax evasionJames Shotter of the Financial Times reported on Monday that several Swiss banks have threatened to freeze American clients’ accounts unless they prove they...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.