When filing your taxes, sometimes you will run into problems and questions with what to claim and which taxes apply to you. There are many different taxes and tax credits that will directly affect whether or not you get a tax rebate or determine how much taxes are owed on your behalf. Anytime you find yourself wondering what to do, whether to claim a tax or a credit, or any other questions you encounter, it's a good idea to refer to the internal revenue service tax help.
One part of filing your taxes is claiming capital gains or losses. This is referred to as the IRS capital gain tax and is filed on form 1040 line 13. I have decided to include some information about this specific tax throughout this article.
First, what is the IRS capital gain tax? Well, to put it simply, almost everything you own is considered a capital asset. Items such as your vehicle, an RV for taking trips, etc. are to be included when calculating your capital assets. When you sell a capital asset, the difference between the assets value and cost to you and what you sold the item for is referred to as capital gain or capital loss. Any type of capital gain MUST be reported on your annual income taxes.
There are two classifications for capital gains; long-term and short-term. Classification is based on how long you owned that item before deciding to sell it. Owning something for a year or more classifies it as a long-term asset; while owning something for less than a whole year will classify it as a short-term asset.
Tax rates for capital gains are much lower than those you would claim for other income you receive. These rates are referred to as the maximum capital gains rates. If you have capital loss instead of gains, you can claim this for a tax reduction of up to $3,000.
There is a lot to consider when filing your taxes. Capital gain is a very important part of these considerations. You must report all capital gains on your annual taxes. If there is a capital loss, you can claim that for a tax reduction, as well. Getting to know the taxes that may affect you individually is the first step in successful tax preparation. There is much more information on capital gains and other taxes on the IRS website at www.irs.gov.