Issue Number: IRS TT-2009-35 Feb. 20,
2009
Tax Facts About
Capital Gains and Losses
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).
Links:
- Publication 17, Your Federal Income Tax (PDF
2015.9K)
- Publication 550, Investment Income and Expenses (PDF
516K)
- Publication 544, Sales and Other Dispositions of Assets (PDF
321K)
- Publication 505, Tax
Withholding and Estimated Tax (PDF
367K)
- Publication 564,
Mutual Fund Distributions (PDF
178K)
- Publication 547, Casualties, Disasters, and
Thefts (PDF
133K)
- Publication 527, Residential Rental Property (Including Rental of
Vacation Homes) (PDF
187K)
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