A Quick guide to Capital Tax Rate

Our tax returns hold us accountable for all our belongings and assets. These include everything we own and use including our investments. All of these constitute our capital assets incurring a capital gains tax calculated using a set tax rate. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you gained from the sale is a capital gain or a capital loss.  You have a capital gain if you sell the asset for more than your adjusted basis <www.irs.gov/publications/p551>. You have a capital loss if you sell the asset for less than your adjusted basis.
To correctly arrive at your net capital gain or loss, capital gains and losses are classified as long-term or short-term.
·If you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term.
·If you hold the asset for one year or less, your capital gain or loss is short-term.
The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss for the year.
The term “net long-term capital gain” means long-term capital gains reduced by long-term capital losses including any unused long-term capital loss carried over from previous years.
·Capital gains tax rate
The tax rate on most net capital gain is no higher than *15%* for most individuals. The tax rate is further specified as follows-
1.Some or all net capital gain may be taxed at 0% if your taxable income is less than $80,000.
2.A capital gain rate of *15%* applies if your taxable income is $80,000 or more but less than $441,450 for single; $496,600 for married filing jointly or qualifying widow(er); $469,050 for head of household, or $248,300 for married filing separately.
However, a net capital gain tax rate of *20%* applies if your taxable income exceeds the above mentioned thresholds set for the *15%* capital gain rate.
There are a few other exceptions where capital gains may be taxed at rates greater than *20%*:
1.The taxable part of a gain from selling section 1202 qualified small business stock is taxed at a maximum *28%* rate.
2. Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum *28%* rate. 3. The portion of any unrecaptured section 1250 gain <www.irs.gov/publications/p544>from selling section 1250 real property is taxed at a maximum *25%* rate.
Limit on the Deduction and Carryover of Losses
If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 21 of Schedule D (Form 1040) <www.irs.gov/forms-pubs/about-schedule-d-form-1040>.
The capital gain rate forms an integral part of one’s tax returns every year. Tactical knowledge and skills required for accurate filing of tax returns, is why one needs experienced teams like those at National Tax Preparers of America (NTPA). Enabling ease and ensuring accuracy of tax filings is our main goal.