The IRS regards almost every asset you use or own for business or personal reasons as a capital asset. Such items include your personal residence in addition to any furniture or stocks and bonds held in your own name. Net profit or loss from the sale of such commodities is either a capital gain or loss.
All capital gains must be accurately and fully reported on federal tax returns.
Deductible capital losses are limited to investment property.
Capital gains and losses may be categorized as either “short-term” or “long-term.”
Applicable net capital gain taxes are typically lower than other taxable income rates. Maximum 2001 tax year tax rates for most individuals is 15%. Low-income individuals’ tax liability may be as low as 0 % on all or part of net gain. Special capital gains categories may attract tax liabilities of 25 to 28 percent.
Capital losses which exceed capital gains are deductible to offset other income such as salaries or wages. Annual deductible amounts are limited to $1,500 and $3,000, depending on your filing status.
If net capital losses exceed the allowable annual deductible amounts, you may rollover part of the unclaimed sum by deducting it on the next year’s tax return. The IRS will then regard it as though it was actually incurred during that tax year.
Form 8949 – Sales and Other Capital Asset Dispositions will be required to compute capital losses and gains. Taxpayers must list all details of capital asset disposition on this form and transfer the net figure to Form 1040 Schedule D.
- 2011 Rules for Charitable Contribution Deductions (2011taxes.org)
- 2012 Taxes And The Proposed Tax Rates (2011taxes.org)