Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings, stock, bonds and collectibles. Basically everything you own.
When you sell a capital asset, the difference between the amount you paid for the asset and its sales price is known as a capital gain or capital loss. Here are 6 important facts you should know about how gains and losses can affect your federal income tax return.
- Gains and Losses to report on your return. A capital gain or loss is the difference between your basis and the sale price when you sell an asset. Your basis is usually what you paid for the asset. You must report all capital gains on your tax return. The gain is taxed at 15%, except collectibles which are taxed at 28%. Before calculating the tax you net the gains and losses.
- Net Investment Income Tax. A new law says that you may be subject to the Net Investment Income Tax (NIIT) on your capital gains if your income is above certain amounts. The rate of this tax is 3.8 percent. For additional information about the NIIT, please call the office.
- Deductible Losses. You can only deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
- Limit on Losses. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return to reduce other income, such as wages. This loss is limited to $3,000 per year.
- Carryover Losses. 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 and any unused amount can be carried over indefinitely.
- Forms to File. You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses, is a summary of information om form 8949.
Please call the office if you need more information about reporting capital gains and losses.
A human lifeline to help you do your taxes correctly, so you save the most money and avoid an audit.
Every US citizen must have health insurance starting 1/1/14 under the Affordable Care Act.
You can buy it privately or through Covered CA (coveredca.com). There are some exceptions to the mandate, but if you don’t qualify and you don’t have insurance you will be charged a penalty on your
This year insurance companies and employers are filing form 1095-B and 1095-C with the IRS so that they can monitor and check that you had insurance coverage. If you do not have coverage or even part year coverage, and you did not calculate the penalty on your return, it is very likely you will be notified by the IRS of additional tax/penalty due. Be sure to let your tax preparer know about your insurance coverage and give them the 1095 forms with your tax documents when they are preparing your return.
Next estimates due April 15, June 15, September 15 and January 15.
For state estimate you might want to pay it by December 31 if you itemize
your deductions. Reminder, California estimates are not paid in equal installments. They are due April 15 30% of previous years tax, June 15 40% and January 15 or December 31 30% previous years tax.
This is very important to be stated correctly in divorce agreement.
One is deductible and one is not.
Should I lease or buy a car ? Does one give me more tax deduction? Maybe. Deciding to buy or lease a car should not be determined based on tax deduction alone. Both allow deduction of some sort but with limitations. I like to ask clients, how much do you drive? Do you like to hold onto a car for more than 3 years? Cars loose value as soon as you drive it off the lot, so there are alot of things to consider before deciding to lease or buy a car.