Would you like to know what is considered capital gains by the IRS? Would you like to know how much it might cost you?
Capital gains is what the IRS says is your profit when you sell something that is defined as a capital asset. Real estate, mutual fund shares, stocks, and bonds are all considered capital assets. If you inherited a home or real estate you might be subject to the capital gains tax.
How Much is The Capital Gains Tax Rate?
Your tax will depend on a few things. If you have a short term capital gain you will be taxed at your normal tax rate. However, if you have a long term gain you will be taxed at 15%. If you are in a tax bracket of 14% or less you'll be taxed at 5%.
How do I know if I have a short term or long term gain? To determine whether you have a long or short term capital gain is quite simple. Property that you own for less than one year is defined as short term. Property that you own for more than one year is defined as long term.
What if I lost money?
If you lost money on a capital asset it can be deducted on your taxes. Money that you lost on an investment is used first against profits you've made on another investment. Short term and long term capital losses can both be deducted but there are certain rules for each type of capital gain.
To read more about capital gains tax laws and rates continue here, capital gains tax law You can also use the free tax calculator provided by Turbo Tax Online to figure your capital gains tax.