How To Classify Capital Gains Tax

Taxes that are placed on the profits you make from the sale of liquid assets are called capital gains taxes. These assets must have been purchased at a lower price and do not include inventory assets such as supplies needed to produce a final product.  These taxes usually pertain to profits made from the sale of real estate, stocks, bonds and precious metals.  Dividends on stocks can also fall under the capital gains tax.  Determination of any other liquid assets that could fall under the capital gains tax is decided at state and federal levels.  There is a different tax rates for individuals and corporations as well as different levels of taxation.  Any profit that you make from the sale, regardless of the amount, will be considered subject to the capital gains tax.

In the United States you must list your capital gains as a form of income and pay income tax on the gain.  Long-term and short term gains are taxed at a different rate for both corporate and individual levels.  A short term gain is a gain based upon the sale of an asset that was held for under a year.  This type of gain is taxed at the higher rate or regular income tax rate.  Long term gains, for assets held over one year, will be taxed at the rate of fifteen percent for corporations and five percent for individuals.  President Obama signed into law in February 2009, a tax increase on capital gains tax and the percentage will rise to twenty percent in the year 2011.

There are several ways to defer taxation on capital gains, but you must employ a tax strategist to do so.  Structured sales, charitable trusts and self-directed installment sales are a few ways to cut down on the tax burden.  While these are all good strategies for the very affluent, they are not necessarily helpful tools for your every day investor.

When you sell your home or real estate and make a profit from the sale, you will be required to pay tax on that profit.  It is very advisable to enlist the help of an accountant to prepare your taxes that year so you can claim as many deductions as allowable by law.  Making a large profit from a sale will boost your income level and push you into a higher tax bracket.  Make sure when you are planning to make a sale of property or stocks you have a well documented account of the costs associated with this sale so you can claim a deduction.


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