When you sell a capital asset, such as an investment or a piece of property, the sale can result in a capital gain or loss. The IRS defines a capital asset as “most property you own for personal use or own as an investment.”
Here are four facts you should keep in mind:
- A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell the asset.
- You must include all capital gains in your income, and you may be subject to the Net Investment Income Tax if your income is above certain amounts. Consult a qualified tax expert for help.
- The IRS allows you to deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
- If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.
*This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.