Broker Check

Understanding Capital gains and Losses

December 16, 2021

As always, please consult a tax professional for information specific to you. The below information is not intended to be tax advice. 

Topic No. 409 Capital Gains and Losses | Internal Revenue Service (irs.gov)

Year-end generally is a time when investments are analyzed, and tax strategies are implemented to try and save a few bucks. Below are the bullet points you should be aware of. Full detail is provided in the link above from the IRS website. 

  • When a capital asset (example: a stock) is bought and then sold, a taxable event has occurred
  • If the price you paid is less than the price you sold it for, you have a Gain
  • If the price you paid is more than the price you sold it for, you have a Loss
  • If the time between the purchase and sale is one year or less, you have a Short Term Event
  • If the time between the purchase and the sale is greater than one year, you have a Long term Event 
  • Short term gains are taxed at ordinary income rates
  • Long terms gains are taxed at capital gain rates
  • You are able to NET gains against losses to reduce the amount taxable 
  • If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 21 of Form 1040

If you have any questions or would like to discuss a specific event, don't hesitate to contact us. 

To your financial success,

Alex Orlando