IRS Capital Gains - This Tax is You Watching Your Investment Dollars Going Away

The IRS capital gains tax is the method the US government uses to tax any profit you may incur from being a savvy investor.

Capital gains and losses from a person's investments in capital assets do not occur in the purchasing and owning assets. The only time there is a tax liability is when a capital is sold for a profit. This includes financial investment like stocks and bonds along with personal assets like boats and other recreational items. These types of capital assets are divided into short term and long term capital gains and losses.

A long term capital gain or loss occurs when a capital assets is held for more than one year before it is sold. A short term capital gain or loss is when the capital asset is sold within one year of it purchase. The major distinction between the two is the rate at which they are taxed. The short term capital gains tax is at a higher rate a majority of the time.

There are other capital assets that are taxed differently than the short term and long term gains, these are items that are considered art or collectibles. These are taxed at the highest rate of any asset upon their sale. The final tax rate is dependent on the tax payers overall income level.

There are also capital losses. The IRS does not require you to report these because they cannot tax them. If you have a capital loss, you can report them but the amount is limited to $3000 per filing year. If your losses are greater than they must be carried over to the next tax filing year.

This is the basics of the IRS capital gains and losses explanation. More information can be found at the IRS website.

Of course, the above is not legal or accounting advice - it is for informational purposes only. Before making any decisions regarding legal or tax matters, it is vital that you consult a licensed professional lawyer or tax accountant.