10 Facts about Capital Gains and Losses
Have you heard of capital gains and losses? If not, you may want to read up on them because they might have an impact on your tax return. The IRS wants you to know these ten facts about gains and losses and how they could affect your tax situation.
1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is
usually what you paid for it – is a capital gain or a capital loss.
3. You must report all capital gains.
4. You may deduct capital losses only on investment property, not on property held for personal use.
5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold 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.
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.
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
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
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.
10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line
13of Form 1040.
For more information about reporting capital gains and losses, please call me to see if you are eligible.
As always, please don't hesitate to call us if we can assist you in any way.
Michael R. Favazza, CPA
Favazza & Associates, LLC
Certified Public Accountants and Business Consultants
1811 Sherman Dr. Suite 9
St. Charles, MO 63303
Phone: (636) 916-1010