Capital Gains Ignorance Leads To Catastrophic Losses

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.

Simple Tips To Help You When Determining Your Filing Status

Eight Tips to Help You Determine Your Filing Status

Before you file your federal income tax returns, you must first determine you filing status. There are 5 filing statuses: Married Filing Jointly, Single, Married Filing Separately, Qualifying Widow or Widower with Dependent Child and Head of Household. Your filing status is normally used to determine your standard deductions, filing requirements, eligibility for certain deductions and credits. It also helps in computing correct taxes.

It is important to note that some people may have more than one status. The following are 8 tips to help you when filing your returns. These tips will help you determine your status according to IRS regulations.

Your marital status for the entire year is determined by your marital status on the final day of the tax year.

If you qualify for several filing statuses, choose the one with the lowest tax obligation.

Single filing status applies to you if you are divorced, unmarried or legally separated.

The filing status for married couples is Married Filing Jointly.

If your spouse passed away during the year, you can still use Married Filing Jointly as your filing status for that year.

A married couple might use Married Filing Separately as their individual filing statuses when filing their returns individually.

If your spouse died during the tax year and left you with children who still depend on you, you can choose Qualifying Widow or Widower with Dependent Child provided you did not remarry during the same year.

There is a lot of information regarding tax return filing that the average taxpayer may not know about. For more information about filing your federal return, visit www.irs.gov.