Almost everything you own and use for personal or investment purposes is
a capital asset. Examples are your home, household furnishings, and stocks
or bonds held in your personal account. When you sell a capital asset, the
difference between the amount you sell it for and your basis, which is usually
what you paid for it, is a capital gain or a capital loss. If you received
the asset as a gift or inheritance, refer to Topic 703 for information
about your basis. You have a capital gain if you sell the asset for more than
your basis. You have a capital loss if you sell the asset for less than your
basis. Losses from the sale of personal–use property, such as your home
or car, are not deductible.
Capital gains and losses are classified as long–term or short–term.
If you hold the asset for more than one year before you dispose of it, your
capital gain or loss is long term. If you hold it one year or less, your capital
gain or loss is short term.
You may have to report capital gains and losses on Schedule D of Form 1040(PDF). If you have a net capital gain, that gain
may be taxed at a lower tax rate. The term "net capital gain" means the amount
by which your net long–term capital gain for the year is more than your
net short–term capital loss. The highest tax rate on a net capital gain
is generally 15% (or 5%, if it would otherwise be taxed at 15% or less). There
are 3 exceptions:
The taxable part of a gain from qualified small business stock is taxed
at a maximum 28% rate.
Net capital gain from selling collectibles such as coins or art is taxed
at a maximum 28% rate.
The part of any net capital gain from selling Section 1250 real property
that is due to depreciation is taxed at a maximum 25% rate.
If you have a taxable capital gain, you may be required to make estimated
tax payments. Refer to Topic 355, or to Publication 505, Tax
Withholding and Estimated Tax for additional information.
If your capital losses exceed your capital gains, the amount of the excess
loss that can be claimed is limited to $3,000, or $1,500 if you are married
filing separately. If your net capital loss is more than this limit, you can
carry the loss forward to later years. Use the Capital Loss Carryover Worksheet
in Schedule Publication 550, to figure the amount carried
forward.
Additional information on capital gains and losses is available in Publication 550, Investment Income and Expenses, and Publication 544, Sales
and Other Dispositions of Assets. If you sell your main home, refer to Topics 701 and 703, or to Publication 523, Selling
Your Home.
