Taxation of capital gains from investments?
Hello, I know that for the long-term capital gain would be taxed at 15% tax bracket and the capital loss (which period of time), may be tax deductible until 3000. However, say this year, I lost the same strain 3000, and 3000 capital gain in the long term to another warehouse. From what I studied, which cancel each other out. This is true, or both operations can be recorded separately according to the rule I described above dessus.dans other words, the gain or loss is the net investment or any transaction applies the rule. thanks.
December 15th, 2009 at 12:26 am
Couple quick definitions/assumptions first, then I will attempt to answer your question:
Definitions:
Capital Gain: When you sell an investment (like a stock) for more than its basis (in general, what you have paid for it).
Capital Loss: When you sell an investment (like a stock) for less than its basis (in general, what you have paid for it).
I include the definitions only because it is not clear to me if your ‘loss’ is a capital loss (where you have sold the stock), or if you still own the stock but it has gone down in value. If you still own the stock (no partial sale) and it has lost value, it is not considered a capital loss for tax purposes.
Assumptions: I am assuming that the investments in question are held by an individual taxpayer (not a company or corporation), and that the loss is a capital loss (see above).
Answer:
If in a particular year, you have capital gains and capital losses, you net the capital gains and capital losses.
If you end up with a net capital gain, you pay tax on the net capital gain only (based upon a calculation which factors in how long you held the stocks – long term vs short term)
If you end up with a net 0 (no gain or loss), you pay no tax on the investing activities
If you end up with a net capital loss, you can deduct up to 3000 of that loss in the current year, and any net capital losses over and above the 3000 can be carried forward and offset against future investment and/or ordinary income.
Hope this helps
December 15th, 2009 at 1:24 am
The 3000 loss and the 3000 gain would cancel each other out. They would be recorded separately but it’s the net total of $0 gain/loss that would show on your Schedule D. It’s your net for the year that counts. By the way, while the capital gains is taxed at a maximum 15% bracket, if you are in the 10% or 15% tax brackets the rate is 5% instead of 15%.
December 15th, 2009 at 1:30 am
They’ll be shown separately on your schedule D, but they will then be netted together so in effect will cancel each other out.