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10 Facts about Capital Gains and Losses

Spring is here, that means it’s tax season!  The term “capital asset” applies to almost everything you own and use.  It is important to document capital assets you bought and sold throughout the year.   Here are 10 helpful facts about capital gains and losses. 

1.Almost everything you own is a capital asset.  Whether it is your home, furnishings, cars, or investments, these are all capital assets.

2.A capital gain or loss occurs when you sell an asset.  If the amount you receive is more than what you paid for the asset, you have a capital gain.  If you receive less, you have a capital loss.

3.You must include all capital gains on your income

4.You may deduct capital losses on the sale of investment property.  You can’t deduct losses on the sale of personal use property

5.Capital gains and losses can be either long-term or short-term.  Property that is held less than one year is considered short-term, while property held more than one year is long-term.

6.If your capital gains exceed your capital losses, the difference between the two is a net capital gain.

7.Long-term capital gains are taxed at a lower rate than other types of income.  Typically, the maximum capital gains rate for 2012 is 15 percent.

8.If your capital losses exceed your capital gains, you can deduct the difference between the two on your tax return.  The limit for this deduction is $3,000 for married filing jointly or $1,500 if you are married filing separately.

9.If your total net capital loss is more than the limit, you can carry forward the losses into your next year’s tax return

10.Use form 8949, Sales and Other Dispositions of Capital Assets, to help you calculate capital gains and losses.

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