Podcast
Questions and Answers
What type of tax is levied on the profit made from the sale of an asset?
What type of tax is levied on the profit made from the sale of an asset?
Capital Gains Tax
How is the profit calculated for Capital Gains Tax?
How is the profit calculated for Capital Gains Tax?
By subtracting the original purchase price (cost basis) from the sale price
What is the tax rate for long-term capital gains for taxpayers in the 10% and 12% income tax brackets?
What is the tax rate for long-term capital gains for taxpayers in the 10% and 12% income tax brackets?
0%
What is the exemption amount for capital gains on the sale of a primary residence?
What is the exemption amount for capital gains on the sale of a primary residence?
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What form is used to report sales and other dispositions of capital assets?
What form is used to report sales and other dispositions of capital assets?
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What is the purpose of Schedule D?
What is the purpose of Schedule D?
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What is the purpose of the Wash Sale Rule?
What is the purpose of the Wash Sale Rule?
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What is the purpose of Like-Kind Exchanges?
What is the purpose of Like-Kind Exchanges?
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Study Notes
What is Capital Gains Tax?
- A type of tax levied on the profit made from the sale of an asset, such as real estate, stocks, bonds, or mutual funds.
- The profit is calculated by subtracting the original purchase price (cost basis) from the sale price.
Types of Capital Gains Tax
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Long-term capital gains tax: Applied to assets held for more than one year.
- Tax rates: 0%, 15%, or 20%, depending on income tax bracket and filing status.
-
Short-term capital gains tax: Applied to assets held for one year or less.
- Taxed as ordinary income, at the taxpayer's income tax rate.
Capital Gains Tax Rates
- 0% rate: Applies to long-term capital gains for taxpayers in the 10% and 12% income tax brackets.
- 15% rate: Applies to long-term capital gains for taxpayers in the 22%, 24%, 32%, and 35% income tax brackets.
- 20% rate: Applies to long-term capital gains for taxpayers in the 37% income tax bracket.
Exemptions and Deductions
- Primary Residence Exemption: Up to $250,000 ($500,000 for married couples) of capital gains on the sale of a primary residence is exempt from taxation, if certain conditions are met.
- Capital Loss Deduction: Capital losses can be deducted from capital gains, reducing tax liability.
Reporting Capital Gains Tax
- Form 8949: Used to report sales and other dispositions of capital assets.
- Schedule D: Used to calculate and report capital gains and losses.
Other Considerations
- Wash Sale Rule: Disallows a loss on the sale of securities if substantially identical securities are purchased within 30 days.
- Like-Kind Exchanges: Allows for the deferral of capital gains tax on the exchange of certain business or investment properties.
Capital Gains Tax
- A tax levied on the profit made from the sale of an asset, such as real estate, stocks, bonds, or mutual funds
- Profit is calculated by subtracting the original purchase price (cost basis) from the sale price
Types of Capital Gains Tax
-
Long-term capital gains tax: Applies to assets held for more than one year
- Tax rates: 0%, 15%, or 20%, depending on income tax bracket and filing status
-
Short-term capital gains tax: Applies to assets held for one year or less
- Taxed as ordinary income, at the taxpayer's income tax rate
Capital Gains Tax Rates
- 0% rate: Applies to long-term capital gains for taxpayers in the 10% and 12% income tax brackets
- 15% rate: Applies to long-term capital gains for taxpayers in the 22%, 24%, 32%, and 35% income tax brackets
- 20% rate: Applies to long-term capital gains for taxpayers in the 37% income tax bracket
Exemptions and Deductions
- Primary Residence Exemption: Up to $250,000 ($500,000 for married couples) of capital gains on the sale of a primary residence is exempt from taxation, if certain conditions are met
- Capital Loss Deduction: Capital losses can be deducted from capital gains, reducing tax liability
Reporting Capital Gains Tax
- Form 8949: Used to report sales and other dispositions of capital assets
- Schedule D: Used to calculate and report capital gains and losses
Other Considerations
- Wash Sale Rule: Disallows a loss on the sale of securities if substantially identical securities are purchased within 30 days
- Like-Kind Exchanges: Allows for the deferral of capital gains tax on the exchange of certain business or investment properties
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Description
Learn about the types of capital gains tax, including long-term and short-term, and how it is calculated on the sale of assets such as real estate, stocks, and bonds.
