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Your Options & Requirements
for Reporting Capital Gains

Jan. 27, 2022

Closeup on notebook over vintage desk background,It is crucial to understand your options and requirements for reporting capital gains to ensure that you report the information to the Internal Revenue Service accurately and comply with all applicable tax reporting rules.

Make sure you consult with a tax lawyer here in the Fort Lauderdale, Florida area for assistance with reporting capital gains. At Zuckerman Law, LLC, I address the capital gains tax concerns of my clients and help them maximize their tax savings. I provide clients with a wide range of tax services throughout South Florida, including Fort Lauderdale, Boca Raton, Miami, Aventura, Sunny Isles, Hollywood, and North Miami Beach.

What Are Capital Gains?

A capital asset is any item you own and use for personal and investment purposes. Capital assets can include homes, automobiles, stocks, bonds, investments, household furnishings, and other items. When selling a capital asset, the difference between the original value of the asset and the sale price is considered a capital gain or a capital loss, depending on whether you earn any profit from the sale.

In other words, you have a capital gain if you sell a capital asset for more than its original price. A capital loss, on the other hand, is when you sell a capital asset for less than its original price. Common examples of capital assets include:

  • A personal automobile

  • The primary residence (home)

  • Stocks

  • Bonds

  • Other investments

  • Personal property, including clothing and household furnishings

  • Jewelry, gems, and other valuables

  • Collectibles, including artworks and coins

  • Real estate not used for business or rental purposes

According to the IRS, the tax rate on net capital gain does not exceed 15% for most individuals.

Long-Term vs. Short-Term Capital Gains

Reporting capital gains requires an understanding of long-term and short-term capital gains. The main difference between the two is how long you have held a particular capital asset. The amount of time an individual holds a capital asset is referred to as the holding period.

  1. Long-term: Long-term capital gains are profits you make from selling a capital asset that you have held for longer than a year.

  2. Short-term: Short-term capital gains are profits you make from selling a capital asset that you have held for a period not exceeding a year.

There are different rules and tax rates applied to long-term and short-term capital gains. As a rule of thumb, individuals pay substantially less in taxes on long-term capital gains.

Reporting Capital Gains

Reporting capital gains requires a taxpayer to fill out at least two forms and attach them along with their Form 1040, an IRS tax form used for personal federal income tax returns. The tax forms that need to be completed and filed depend on the type of capital gain.

You also need to gather the necessary documentation listing all of your capital gains and losses from the year. In addition, when reporting capital gains, you need to know the asset’s cost basis, which is the price for which you originally purchased the asset.

Reporting capital gains also requires you to complete Form 8949, which lists all of your capital gains and capital losses from the year, and Schedule D, which must specify how much you owe the IRS on your capital gains. Consider contacting a knowledgeable tax lawyer to help you report capital gains and explore your options.

How Legal Counsel Can Help

Reporting capital gains is a complicated task that requires a thorough understanding of tax laws and IRS rules. You need to seek legal counsel from an experienced tax attorney to assist you with reporting capital gains to avoid mistakes and develop a smart tax strategy tailored to your needs. As a tax lawyer with decades of experience, I am dedicated to helping you explore all of your options and requirements for reporting capital gains. If you are located in Boca Raton, Miami, Aventura, Sunny Isles, Hollywood, and North Miami Beach, get a case review by reaching out to me at Zuckerman Law, LLC in Fort Lauderdale, Florida.