A capital gain is when you sell something for a higher price than what you initially bought it for. In the similar way a capital loss is when the selling price of an asset is lower that the initial price you purchased it for.
The capital gains tax like its name takes a percentage of the capital gain, but only once it has been ‘realized’. It is only ‘realized’ when the item is sold. An ‘unrealized’ capital gain is when your asset has increased in value but you have not sold it. Therefore the IRS dopes not simply tax capital gains, it taxes realized capital gains.
The IRS has defined a capital asset as everything that you own for investment or personal purposes. That makes up for a lot of things that you own. The most common taxable assets are real estate, securities and valuable collectibles.
If you plan on using a firm to help you buy or sell stocks then they will provide you with a 1099-B form. This form lists all your losses and earnings from the sale of securities. The firm will most likely list all earnings as ‘net proceeds’. This means that the amount you earned excluding any associated commissions and fees.
If you happen to sell property or real estate and you get to make a profit from all the sales, this qualifies as a capital gain as well. However various tax rates are implied on different properties.
There are certain tax breaks that you can reap if you sell your property. If you have used a home for at least two of the last five years than you get to cut put up to $500, 000 in capital gains. This means that you do not have to tax on the cash you make that is unless the money you made goes over the said amount.
How To Calculate These
The first part of calculating capital gains is that you calculate exactly how much capital gain you have made in the year that passed. It is not always simple sometime you have to take into the account the very first time that asset was purchased.
How To Lower It
The best way to lower the capital gains tax amount you owe is to steer clear of short term investments. This is because long term investments always have a lower tax rate then short term investments. If you are faced with the lowest tax bracket then you get to pay nothing for long term capital gains on securities.
Remember to consult a good accountant in Lake Nona, FL for advice on capital gains taxes and your financial situation.
If you need more information about our Lake Nona, FL accounting and tax services, please contact us at 407-502-2400. Freedomtax Accounting’s staff has been providing honest accounting services and tax services for 15 years. Our Orlando accounting and tax firm has its main offices in Kissimmee, FL. Our services are provided nationwide, but mainly in the Central Florida market to areas like Orlando, South Orlando, Kissimmee, St. Cloud, Poinciana, Clermont, Davenport, Hunters Creek, Lake Nona, Celebration, Winter Park, Windermere, Dr. Phillips, Maitland, Altamonte Springs, Winter Garden, Ocoee, Apopka, Belle Isle, Edgewood, and Oakland FL. Our tax accountants and IRS enrolled agents (irs ea) specialize in corporate accounting and bookkeeping, tax services, tax preparation, back taxes help, tax debt relief, tax resolution, tax planning, itin number, incorporations, and non profit 501c3 tax exempt.