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What to Know About Capital Gains Taxes

Capital Gains Taxes


Capital gains are income made from a source other than work. Capital gains can include money made at garage sale, money made from selling stock or money made from selling a home.In fact, there are many types of income that are considered a capital gain.

Capital gains taxes are applied to that income, in much the same way as an income tax. Capital gains are added to the individuals income after any allowable losses have been subtracted.


There are a myriad of deductions allowed against capital gains, including any capital losses. For example, an individual that lost money during the sale of their home, could subtract that loss from any capital gains. The capital gains tax would only be applied to the actual gain.

Many types of capital losses are allowed to be deducted until the full value of the loss has been deducted from any capital gains, even if it takes several years to cover the loss. However, individuals can only deduct an amount that is equal to or less than their capital gains for that year.

If an individual were to take a capital loss of ten thousand dollars in one year, they may have only had a capital gain of five thousand. That individual would then be allowed to carry over the capital loss into the next year and use it as a deduction against future capital gains.

NEXT: A Short Guide to Car Tax

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