5 Uses For Taxes

Category Financial

Key Things You Ought To Know About Capital Gains

A capital gain occurs when you are selling something for more than you have actually spent for it. This is rampant when it comes to investments, but it can also be applicable to your personal property. You can get a car for $3,500, and decide to resell it a week later for $5,500 – giving you a capital gain of $2,000. And even if it seems quite easy to grasp, and even made easier by the existence of capital gain tax calculators, it still best to know a few basic things about capital gains taxes.

Capital gains aren’t just for the rich

Anyone who’s interested to sell a capital asset should expect that capital gains may be applied. And according to the Internal Revenue Service (IRS), just about everything you possess can be qualified as a capital asset. That’s the case whether an investment was bough, such as property or stocks, or for personal stuff like your car or your huge flat screen TV.

If you sell something above your “basis”, you get your capital gain from the difference and you are required to report your gains on your taxes.

The basis is basically the amount you paid for the item. It entails not only the price of the item but also any other costs you paid for to acquire it, including excise taxes, sales taxes, and other taxes or fees, handling and shipping fees, installation and setup costs, and money spent on improvements to increase the asset value of the product.

Most of the time, you home is an exemption.

Your home, just as for many people, is the single biggest asset you have, and depending on the real estate market, you might realize a large capital gain if you put it on sale. Good news is, tax code lets you exclude some, if not, all of such a gain from your capital gains tax, so long as (1) you owned the property for a total of 2 years (minimum) in the 5-year period before the sale, (2) you lived in your property as primary residence for a minimum of two years in the same 5-year period, and (3) you have not excluded the gain from a different home sale within a 2-year period before the sale.

Your business income is not part of your capital gain.

If you are operating a business that buys and sells items, the gains from your sales will be valued and taxed as business income instead of capital gains.

Capital losses can decrease capital gains.

Anyone with enough investment experience would agree that things don’t always rise in value – sometimes, they flunk. So if you sell something below its basis, you get a capital loss.

Source: http://www.amarillorealestateguide.com/how-does-capital-gains-tax-affect-my-home-sale/