![]() ![]() The tax bite from short-term gains is significantly larger than that from long-term gains - typically 10-20% higher. How much your gain is taxed depends on how long you owned the asset before selling. If you sell an asset you've owned for a year or less, though, it's a "short-term" capital gain. If you sell an asset after owning it for more than a year, any gain you have is a "long-term" capital gain. If you meet these conditions, you can exclude up to $250,000 of your gain if you're single, $500,000 if you're married filing jointly. You haven't excluded the gain from another home sale in the two-year period before the sale. You used the home as your primary residence for a total of at least two years in that same five-year period. You owned the home for a total of at least two years in the five-year period before the sale. The good news is that the tax code allows you to exclude some or all of such a gain from capital gains tax, as long as you meet three conditions: ![]() ![]() The single biggest asset many people have is their home, and depending on the real estate market, a homeowner might realize a huge capital gain on a sale. Depreciation of an asset can reduce your basis. In addition, money spent on improvements that increase the value of the asset-such as a new addition to a building-can be added to your basis. Sales taxes, excise taxes and other taxes and fees It includes not only the price of the item, but any other costs you had to pay to acquire it, including: Your basis is usually what you paid for the item. If you sell something for more than your "basis" in the item, then the difference is a capital gain, and you’ll need to report that gain on your taxes. That's the case whether you bought it as an investment, such as stocks or property, or for personal use, such as a car or a big-screen TV. And as the Internal Revenue Service points out, just about everything you own qualifies as a capital asset. Capital gains aren't just for rich peopleĪnyone who sells a capital asset should know that capital gains tax may apply. Every taxpayer should understand these basic facts about capital gains taxes. This happens a lot with investments, but it also applies to personal property, such as a car. Every taxpayer should understand the basic facts about capital gains taxes.Ī capital gain occurs when you sell something for more than you spent to acquire it. ![]()
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