Capital gains and losses

Capital gains and losses are monetary amounts that result from the sale or exchange of a capital asset. Generally, for individuals in tax brackets of 28 percent or less, capital gains are taxed like regular income. Be sure to pay close attention to the different reporting rules for investment, business, and personal property when preparing this part of your return. Take note that short- and long-term gains are not treated equally, and that if you only have capital gain distributions to claim, you can now report the income directly on Form 1040 (10-40), instead of Schedule D. One important change regarding long-term gains is that the 10 percent capital gain rate has been lowered to 5 percent for qualified five-year gain, which is money earned from the sale of a property that you held for more than five years. For taxpayers with capital losses, you can only deduct up to $3,000 (three thousand dollars), with the excess carried forward to future years. Any losses on assets used for personal reasons can't be deducted. The tax rules surrounding capital gains and losses tend to be quite complicated. As a result, it's recommended that you refer to the tax code for details concerning this area. For more information on reporting capital gains and losses, consult a tax advisor or call the toll-free number for federal tax information and assistance at 1-800-829-1040.