Video: What Is the Capital Gains Tax?
Learn about when the capital gains tax applies. The capital gains tax only applies when you sell a capital asset for a profit. We’ll walk you through how to calculate your profits and effectively report them on your tax return.
Video transcript:
Wondering when the capital gains tax applies? Let's look at it together in this edition of Tax Tips by TurboTax.
The capital gains tax only applies when you sell a capital asset for a profit. A capital asset is essentially any property you own.
The list of capital assets is endless, but it usually refers to your home, car, stocks, and even your furniture. When it's time to file your tax return, the IRS requires you to report any capital assets you sell during the year on Schedule D.
But how do you calculate your profit? Calculating your profit is pretty straightforward. For example, if you purchase a stock for $5 a share and then you sell it for $8, your profit at $3 per share is subject to the capital gains tax.
If you sell the stock within the first year you bought it, you'll have to pay a higher short term capital gains tax rate. However, if you owned the asset for over a year, you'll typically pay a lower long term capital gains tax rate.
To find the current rates for capital gains, check out our article linked in this video's description. TurboTax helps you seamlessly report income from investments, rental properties and more. Ensuring you get every dollar you deserve guaranteed.
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