Capital gains taxes are applied to any asset defined as a capital asset such as a home, furnishings, stocks or bonds, according to the Internal Revenue Service. A tax is levied on the difference if the sale amount is higher than thepurchase price.Continue Reading
TheIRS defines what people own and use for personal, pleasure or investment purposes such as a home or car as a capital asset.
When that asset is sold, the difference between what the item or investment sold for is more than what was paid for it, is subject to a tax which is called a capital gains tax, as stated by the IRS.
If the item sold for less than what was paid for it, then it is a capital loss. Losses can be deducted on certain things such as investment property but not property for personal use.
Taxes on capital gains are usually lower than taxes for other income. The tax rules were changed in 2010. Since then, the maximum rate of capital gain for most people is 15 percent. There may be no fee for those in a lower income bracket. For some people,capital gains tax can be as high as 25 or 28 percent, according to the IRS.
If the losses on a sale are more than what the property or investment was bought for, it's possible the difference can be deducted on a tax return. The difference may be used to reduce some income such as wages.Learn more about Taxes