Capital Gains

When you sell capital assets, you have to report either capital gains or capital losses to the IRS. If you sell the capital asset for more than your cost basis, you incur a capital gain. If you sell the capital asset for less than your cost basis, you have a capital loss. If you have capital gains, then you owe capital gains taxes to the IRS.

How to report capital gains?

When you file your tax return each year, you will report capital gains or deductible capital losses on the IRS tax form 1040 schedule D. If you have net capital gains, then the capital gains may be taxed at a lower capital gains tax rate.

What is net capital gain?

Net capital gain is the amount by which your net long term capital gain for the year is more than your net short term capital loss. The net capital gains formula is shown below.

Net capital gain

=

Long term capital gain

-

short term capital loss

When net capital gain is positive, the highest capital gains tax rate on a net capital gain is generally 15%.

• Holding period
• Qualified dividends
  • What are the tax rates of Qualified Dividends and Qualified Dividend Income?
  • How are Qualified Dividends reported on 1099 - DIV forms?
  • Is there a holding period requirement for Qualified Dividends?
  • Non- Qualified Dividends
  • Do mutual funds distribute Qualified Dividends?
  • Do synthetic preferred securities pay Qualified Dividends?