This is a tax for profit gained from sales of non Inventory assets. Most of the capital gain tax is from;
- Real estate
- Property
- Bonds
- Precious metals
- Stocks
Capital gains tax can be both long-term and short-term. Short-term capital gain tax is for one year or less while long-term capital gain tax can be for more than one year.
There are several things that you need to know about capital gain tax so that you can be informed.
1. It Is Not Solely For Rich People
Capital gain tax can apply to anyone selling capital assets. If you sell something at a higher cost than your basis, then you need to report that gain as a capital gain.
The basis is the cost paid for the item and it can also include the additional cost of that item such as sales tax, handling and shipping cost, set up and installation charges and related charges.
2. Your Home Is Exempted From Capital Gain Tax
Homes are a beneficial asset which people can gain a lot of profit from selling them. The good news is that your home can be exempted from capital gain tax according to the tax code. However, there ought to be some condition that you must meet to qualify for tax exemption on your home. These include;
- If you have owned the property for 2 years and more.
- It should be your primary residence for two or more years
- You haven’t gotten any tax-exempt recently from a home sale.
3. The Length Of Ownership
If you sell assets after owning them for more than one year then that is considered as long-term capital gain tax. Tax is usually higher for short-term than for long-term gains.
4. Business Income Is Not Capital Gain
If you are a business owner who buys and sells assets this will be taxed under business income but not a capital gain tax.
5. There Can Be Capital Losses
It is important to realise that assets tend to depreciate which can lead to capital loss. Capital loss can be used to offset your capital gain tax.
There are few things that you can do to lower the capital gain tax imposed on the sale of assets. Some of these include waiting for one year so that it can be considered a long-term capital gain tax. You can also seek help from Shoebox Books today for capital gain tax of your assets. Contact Shoebox Books today for tax, accounting and bookkeeping services.
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