Capital Gains Tax Guide

Incentive stock options enjoy favorable tax treatment compared to other forms of employee compensation. Income from incentive stock options is taxable for federal income tax (including the alternative minimum tax), but are not taxable for Social Security and Medicare taxes. Upon meeting all the criteria for a qualifying sale, income from...

Starting in 2011, American taxpayers will use new Form 8949 along with Schedule D to report income from the sale of stock, bonds, mutual funds and other investments. Form 8949 will detail various transactions, with summary totals transferred to Schedule D.

Shares of company stock purchased through an Employee Stock Purchase Plan (ESPP) is subject to different tax treatment compared to other investments. Part of the gain is taxable as compensation income and subject to the ordinary tax rates. The remainder of the gain is treated as capital gain, which can be taxed at the lower long term capital gains rate. How much of the gain is taxed as compensation depends on how long you hold the shares.

People often end up owning real estate and other property when the original owner has given that property to them. Transfers of property given before the original owner dies is called a gift. Recipients of gift property have different tax consequences than recipients of inherited property.

When homeowners sell their main home, they can exclude up to $500,000 in capital gains from income tax. The Housing Assistance Tax Act of 2008 changes the rules. The amount of profits from the sale of a house that can be excluded is now based on the percentage of time when the house was used as a primary residence.

Foreclosures are treated as the sale of property for tax purposes. Homeowners going through a foreclosure will need to calculate their gain or loss for tax purposes, as well as consider any tax that might be due on the forgiveness or cancellation of debt.

When taxpayers sell an asset that has been depreciated for tax purposes, that sale may trigger a type of capital gain called depreciation recapture. The depreciation recapture tax mostly impacts landlords who are selling rental property. Learn more about the depreciation recapture tax.

A capital gain is the difference between what you paid for an investment and what you received when you sold that investment. If you made a profit on the investment, then you have a capital gain. If you lost money on the investment, then you have a capital loss. Covers record-keeping, calculating capital gains and cost basis.

Use financial software or spreadsheets to track all your investment information in one place. This will save you time and frustration at tax time. Here's some tips for keeping on top of your capital gains information.

How to calculate capital gains taxes on the sale of a main home. Plus tips for lowering your capital gains using the Section 121 capital gains exclusion when selling your principal residence.

Calculating capital gain or loss when selling shares of a mutual fund can be complicated. Essential information about capital gains distributions, calculating mutual fund cost basis, and figuring capital gains or losses.

If you buy the same stock within one month of selling that stock for a loss, your loss will be disallowed under the Wash Sale Rule. The loss is not gone forever, the disallowed is added to your cost basis in the new stock position.

Definition of "Adjusted Basis": the net cost of an asset after adjusting for various tax-related items.

Definition of "Cost Basis": the original price of an asset, such as stocks, bonds, mutual funds, property, or equipment. Cost basis includes the purchase price and any associated purchase costs.

Sample spreadsheet for keeping track of actual cost basis in a mutual fund using the specific identification method of accounting.

A wash sale is selling an investment at a loss and repurchasing the same (or very similar) investment within a short period of time (30 days before to 30 days after selling at a loss). Wash sales result in a deferral of the loss for tax reporting purposes. Wash sales can be avoided through careful investment planning.