When you sell things, including stocks, bonds, real estate, collectibles, and other items, you may either gain money or lose money from the original purchase price. This gain or loss is known as a capital gain or capital loss, and (with some exceptions) you will report these capital gains or losses on your income tax return. Often the gains are afforded special tax rates and treatment, and the losses provide additional benefits as well. This entire area of tax reporting can be confusing and there are special rules that you need to follow in order to make sure that you report these transactions correctly and pay the appropriate taxes. The IRS recently published their Tax Tip 2013-28, which details Ten Facts about Capital Gains and Losses. The actual text of the Tip is below: Ten Facts about Capital Gains and Losses The term “capital asset” for tax purposes applies to […]
capital gains rate
The Importance of a Taxable Investment Account
I’ve written about this topic a few times in the past, such as in this article on tax diversification of your investment accounts. It’s an important topic, but probably the most important subtopic has to do with having a significant portion of your investments not only in tax-deferred accounts, like 401(k) or IRA, but also in regularly-taxed accounts. Roth-type accounts are also critically important, but given the limited availability and costly nature of getting assets into a Roth-type account, I’ll focus for now on the importance of the taxable investment account. With a taxable investment account, you have the opportunity to use the tax code to your advantage, even though it may seem counter to your initial thoughts on the topic. Granted, in a taxable investment account you don’t get the complete tax-deferral that is available from an IRA or the tax-avoidance in a Roth IRA. So with that fact, […]
Tax Bill Higher Than You Expected?
Now that you’ve (hopefully) filed your return for 2010, you may have noticed that the bill was higher than you expected. This may be due to some subtle changes to the tax law that affected your return for this year. Listed below are some of the changes that you may have been impacted by: Social Security taxation: Especially if you had unusual income taxed in 2010, such as a Roth Conversion, you could be subject to as much as 85% taxation of your Social Security benefit. Alternative Minimum Tax: If you’ve been impacted by this, not only are your ordinary income tax items taxed at a higher rate, but your capital gains and dividends could be taxed at a rate higher than 15% as well. This happens for folks with incomes between $150,000 and $439,800 (or $112,500 and $302,300 for singles) as the AMT exemption phaseout occurs. Image via Wikipedia […]