What are capital gains taxes?
One way to think of “capital” is that it is an asset on which you have already paid income taxes. In turn, capital gains can be defined as the difference between the asset’s value when you acquired it and the price when you may sell it, when the difference is positive. The gain is oftentimes difficult to calculate, as t here are a number of different factors, such as previous deductions taken for depreciation. Whatever the figure is, though, a capital gains tax can be assessed on the gain you realize from selling the asset. A capital loss, on the other hand, would be when the same difference the acquisition and the sales price, when the resulting figure is negative. In the usual case, a capital loss can only be used to offset a capital gain. Subject to certain exceptions, it cannot be used to offset ordinary income except to the extent of $3,000 a year. The effect of capital gains on a business will depend on the nature of the business. If the business is an investment company, for exa
To answer this question, it helps to break it down first. Capital signifies your investments, such as mutual funds, stocks, bonds, or real estate. Gains are the income you receive when you sell these investments for a profit. Capital gains google_ad_client = ‘pub-2905054723170537’; // substitute your client_id (pub-number) google_ad_channel = ‘3393335763’; google_ad_output = ‘js’; google_max_num_ads = ‘3’; google_ad_type = ‘text’; google_feedback = ‘on’; google_targeting = “content”; taxes are the government’s share of that profit. Because capital gains taxes aren’t imposed until an asset is actually sold and gains are realized, they encourage those who have accumulated wealth to conserve it. This reduces the flow of venture capital, which is the lifeblood of new entrepreneurs. Capital gains taxes protect those who have inherited money because such recipients can live off their family’s accumulated capital without having to pay tax on it. Thought of another way, capital gains taxes are
Capital is basically your investments; gains are what you get when you sell an investment at a profit. And capital gains taxes are the government s share of that profit. The good news is that if you hold the investment longer than one year, you generally pay less tax on capital gains than you would pay on ordinary income. In 2008, the top rate on capital gains is 15%. If you re in a lower tax bracket (10% or 15%), you ll only pay 5% tax on any gain. In 2008 through 2010, the rate drops to zero for taxpayers in the 10% bracket or 15% bracket.
