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What you need to know about capital gains

When you sell shares of stock, land or a business, and make a profit on it, the profit is known as capital gains. If you lose money on the sale -- in other words, sell it for less than you paid -- that is considered capital losses. You are taxed on capital gains as income.

The rates that you are taxed on the capital gains are dependent on how long you held the asset before selling it. If you owned it less than a year, it is considered a short-term capital gain. The amount would be taxed using the rate for your tax bracket.

If you had the asset longer than a year before selling it and making a profit, it would be considered a long-term capital gain. Long-term capital gains are taxed at a lower rate. Of course, the taxable rates for either are based on your income levels.

If you sell multiple investment items, you can offset capital gains by capital losses when filing your income tax return. For instance, if your capital gains exceed your capital losses, deduct the losses from the gains and you only have to pay tax on the remainder.

There are also some exceptions to certain items, like "collectible assets." Coins, antiques, fine arts or precious metals that are collectibles are normally taxed at 28 percent.

There are ways to minimize your capital gains taxes, such as holding your assets longer than one year. The Internal Revenue Service also has ways to avoid capital gains on your home if you sell it at a profit. If you have lived in your home for two of the five years before selling it, you only have to pay taxes on profits exceeding $250,000 if single and exceeding $500,000 if you are married filing jointly.

If you have capital gains and losses, and do not fully understand the tax laws regarding the selling of these assets, you should talk to a tax attorney. Tax attorneys not only know the tax laws, but they can be one-stop shopping for all of your income tax needs.

Source: Nerd Wallet, "2017-2018 Capital Gains Tax Rates — and How to Avoid a Big Bill," Tina Orem, Feb. 23, 2018

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