Capital Gains

In finance, a capital gain is profit that results from the sale or exchange of an asset over its purchase price. If the price of the capital asset has declined instead of appreciated, this is called sa capital loss. Capital gains occur in both real assets, such as property, as well as financial assets, such as stocks or bonds.

Gains or losses from the sale or exchange of a capital asset are considered capital gains or losses. Per the IRS, almost everything you own and use for personal or investment purposes is considered to be a capital asset. Some examples are your home, your furniture, and any stocks or bonds you might hold in your personal account. So if a person decides to sell any of these asset for more than what they were originally purchased at, the gain is considered taxable. The reverse side is also true that capital losses can be used to offset your tax liability. However, this is not true when it comes to personal-use capital assets like automobiles. They do not affect tax liability.

It's very important that, in this business, you be very well versed in tax laws when it comes to capital gains. If you fail to pay close attention to these laws, you can quickly find yourself in trouble with the IRS.

There are some things to remember when dealing with taxes pertaining to capital gains.

One important detail is that once you bought a new property, you've got two years to sell it before you even get taxed on it. You may possibly choose to rent it for two years before you get taxed on it. If you sell the property after that, then you are going to pay capital gain on it. Long term capital gain would be around the 15% range.

Some may wonder if it is a good idea to move into the property for a period of time to avoid some of the capital gain taxes. This is something that you should discuss with your CPA. It may possibly be a good idea, but it depends on your own personal situation. If you have purchased a property that's in a high appreciating area, then you have a decision to make. Especially if you currently don't have the cash and can do without it. Forget about the tax ramifications and focus on the appreciation of the property. You won't get depreciation unless you do call it a rental.