Long Term Capital Loss Tax
When it comes to short term capital losses and long term capital losses we need to make the distinction between the two. The determining factor is all about time. It depends on how long you hold the property before you sell it.
If you hold the property for more than one year, your capital gain or loss is long term. If you hold your property one year or less, your capital gain or loss is short term. You should also know, you may deduct capital losses only on investment property. You may not deduct the loss for any property held for personal use.
Net Capital Gain
There is also another type of gain which is the net capital gain. This is the amount that is the difference between your net long term capital gain against your net short term capital loss. Generally speaking, the tax rates that apply to your net capital gain have a lower tax rate. For example in 2008, the capital gains rates were 0%, 15%, 25% or 28%.
Capital Losses
Now if your capital losses are greater than your capital gains, the difference can be deducted on your tax return. There are limits of course and the annual limit is $3,000 or $1,500 if you are married but, filing separately.
Net Capital Loss
You may be wondering what happens if your total net capital loss is greater than the annual limit on capital loss deductions. If that is the case, you can carry over the unused part to the next year and claim it as a loss as if it had happened in that next year. I know it sounds too good to be true but, you really can do that.
Reporting Capital Gains and Losses
Just remember to report all capital gains and losses to the IRS. You will need to use Schedule D to report this information and then transfer to line 13 of Form 1040.
Read More
If you want to find out more about the tax rate of capital gains and capital losses, you can use the tax preparation software at TurboTax Onlineto see how your return will look. I don't know about you but, my head spins if I try to read up on all the tax laws, rates and changes. Let the tax experts at Turbo Tax help you with reporting your gains and losses.
You can put your mind to ease by letting them handle all the research and knowledge it takes to keep up with changing times.
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