| 1.
Most everything you possess and use for personal purposes,
pleasure or investment is a capital asset. |
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| 2.
Once you sell a capital asset, the difference between the
amount you sell it for and your basis - which is normally
what you paid for it - is a capital gain or a capital loss.
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| 3.
You must document all capital gains. |
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| 4. You
can deduct capital losses only on investment property, not
on property held for personal use. |
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| 5. Capital
gains and losses are classed as long-term or short-term, contingent
on how long you owned the property before you sell it. If
you hold it more than one year, your capital gain or loss
is long-term. If you hold it one year or less, your capital
gain or loss is short-term. |
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| 6.
If you have long-term gains in excess of your long-term losses,
you have a net capital gain to the extent your net long-term
capital gain is more than your net short-term capital loss,
if any. |
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| 7. The
tax rates that apply to net capital gain are generally lower
than the tax rates that apply to other income. For 2009, the
maximum capital gains rate for most people is15%. For lower-income
individuals, the rate may be 0% on some or all of the net
capital gain. Special types of net capital gain can be taxed
at 25% or 28%. |
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| 8.
If your capital losses exceed your capital gains, the excess
can be deducted on your tax return and used to reduce other
income, such as wages, up to an annual limit of $3,000, or
$1,500 if you are married filing separately. |
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| 9. If
your total net capital loss is more than the yearly limit
on capital loss deductions, you can carry over the unused
part to the next year and treat it as if you incurred it in
that next year. |
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| 10. Capital
gains and losses are reported on Schedule D, Capital Gains
and Losses, and then transferred to line 13of Form 1040. |
Individual
Tax Return Service
Individual
Tax Return Service
