10 Tax Facts: Capital Gains and Losses
January 1, 2009
Do you have questions about reporting gains and losses on your tax return? Here are some facts from the IRS.
• Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset.
• 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.
• You must report all capital gains.
• You may deduct capital losses only on investment property, not on property held for personal use.
• 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.
• Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.
• The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2008, the maximum capital gains rates are 0%, 15%, 25% or 28%.
• If your capital losses exceed your capital gains, the excess can be deducted on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).
• If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
• Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
For more information about reporting capital gains and losses, get Publication 17, Your Federal Income Tax, and Publication 550, Investment Income and Expenses, available on the IRS Web site at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
About the Author: Bob Cain
Some 30 years ago Bob Cain went to a no-money-down seminar and got the notion that owning rental property would be just the best idea there is for making money. He bought some. Trouble was, what he learned at the seminar didn’t tell him how to make money on his rental property. He went looking for help in the form of a magazine or newsletter about the business. He couldn't find any.
Always ready to jump at a great idea, he decided he could put his speaking and writing skills to work and perform a valuable service for other investors who needed more information about property management. So Bob ferreted out the secrets, tricks and techniques of property management wherever he found them; then he passed them along to other landlords.
For over 25 years now, Bob has been publishing information, giving speeches, putting on seminars and workshops, and consulting for landlords on how to buy, rent and manage property more effectively.
