A capital gain is simply the profit you receive as a result of selling a capital asset. When there is sale of the asset after owning it for a short period of time, such sale results in short-term capital gain treatment. If sale of the asset takes place after holding onto it for a longer period, the sale of the asset receives the more favorable long-term capital gain treatment. Likewise, a loss from the sale of a capital asset can sometimes reduce tax liabilities.
It’s no secret that the housing market in many parts of California and the rest of the country has favored sellers. That means after sitting tight through the housing market crash, many people who sold their homes this year brought in a nice little profit.
Fall is here, which means it’s time to start thinking about year-end tax consequences, including capital gains taxes. Of course, you would never want to buy or sell investments based on tax outcomes alone, but it’s still a good idea to understand the tax consequences that you stand to face and plan accordingly.
We are almost done with our overview of how to determine if you must pay a capital gains tax on the sale of your home. A quick recap of the last two posts: Start with what you paid for the home, then add anything that increased the value of the property and deduct anything that may have decreased the value of the property.
Those of us who remember publisher-millionaire Steve Forbes' presidential campaigns may still be able to close their eyes and hear his mantra: "Do the math." His platform was based on instituting a flat tax rate for income tax. It sounds so easy. But so does a comedian's tax reform idea: "How much did you make? Pay that amount."
A house is more than a home: It is an investment. Chances are good that the value of the home will change from the time you purchase it to the time you sell it. California's foreclosure crisis aside, most of us believe that the value will go up so we can make a profit. When you sell a capital asset like a house, you realize a capital gain or a capital loss.
The Internal Revenue Service's position on digital currency such as Bitcoin continues to evolve. As we discussed previously, the IRS issued a decision in March to categorize Bitcoin as taxable property and not official currency. While Bitcoin essentially functions as money, no nation recognizes digital currency as legal tender, though the IRS decision means that federal income taxes and payroll taxes will apply to wages paid in Bitcoin.
An individual is planning on selling their rental home that they have kept as an investment for ten years. They paid $400,000 on the property and have sold it for $500,000. They have also made no capital improvements upon it and are not paying for closing costs or sales commissions. They would then like to pay the $100,000 net profit towards their principal residence.
In our last post we discussed some different possibilities for how the Internal Revenue Service might tax the virtual currency known as bitcoin. The new type of currency has generated a lot of controversy and exists in a legal grey area because people are trading it for goods and services, holding it as an investment, and producing it as a business, but it is not recognized as a currency by any sovereign nation.
At this point in the year California taxpayers are getting serious about submitting their income tax returns. This means carefully combing through one’s finances and making sure that all income and deductions are properly accounted for and that the details are all correct on the forms being submitted to the IRS. For California residents who are holders of the virtual currency bitcoin, there are some important decisions to make about how to report bitcoins on a tax return.