tax term involved with selling or exchanging a capital asset.
Individual: Maximum tax rate on capital gains is 15% compared to the maximum tax rate on ordinary income of 35% for those having taxable incomes exceeding $311,950.
Corporation: Capital gains are taxed as ordinary income.See also capital loss.
gain on the sale of a capital assets. For sales after May 6, 2003, individuals are taxed at a maximum of 15%. There are limits on the deduction of capital loss against ordinary income.
difference between an asset's adjusted purchase price and selling price when the difference is positive. A long-term capital gain is achieved once an asset such as a stock, bond, or mutual fund has been held for more than 12 months. Such long-term gains are taxed at a maximum rate of 15%. Those in the 15% tax bracket pay a 5% tax on long-term capital gains. Selling assets for a profit after holding them for 12 months or less generates short-term capital gains, which are subject to regular income tax rates. Assets purchased starting January 1, 2000 and held for more than five years qualify for a maximum capital gains tax rate of 8%. Capital gains are reported on Schedule D of a tax return.
gain on the sale of a capital asset. Beginning May 6, 2003, the maximum individual tax rate on long-term capital gains is 15%. Deduction of capital losses against ordinary income is limited.
Example: Collins purchases land, for investment purposes, for $100,000. Some 13 months later she sells it for $140,000. She reports the $40,000 profit as a long-term capital gain on her income tax return.
