How to Calculate Capital Gains Taxes
Capital-gains taxes are collected by the IRS on profits you make from selling assets such as stocks and bonds, real estate, jewelry and collectibles. They are classified as long-term and short-term, depending on how long you owned the property, and are taxed at different rates.
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Instructions
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Determine the basis of any capital items you sold during the tax year. The basis is the value of the property at the time you bought or inherited it.
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Calculate your net gain by subtracting the basis from the price you got from selling the item. For example, if you bought a house for $120,000 and sold it for $200,000, your net gain is $80,000.
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3
Determine whether your gains are short-term or long-term. If you owned the asset for less than a year, it is a short-term gain. If you held it for more than a year, it is a long-term gain.
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Subtract your long- and short-term losses, if any, from your long-term gains. This is your capital gain for the year. For example, if you had $5,000 in long-term gains, $2,000 in long-term losses and $1,000 in short-term losses, your total long-term capital gains would be $2,000. It is possible to show negative capital gains, or a capital loss, which can be a deduction on your tax return.
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Determine the tax rate for your capital gains. If it would be taxed at 25% or more if it were included as part of your income, the capital-gains tax rate would be the maximum15%. If it would be taxed at less than 25%, the tax rate would be 0%.
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Determine the tax on your short-term gains by adding them to your adjusted gross income. You will pay your marginal tax rate on these gains. For example, if you fall into the 35% tax bracket, your short-term gains will be taxed at 35%.
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Tips & Warnings
Capital-loss deductions are limited to $3,000 for married couples and $1,500 for individuals. Any excess can be carried over to the next tax year.
If you had capital gains from selling collectibles, the maximum tax rate would increase to 28%.
References
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Comments
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thank you very useful information...
