Chip 2004 June/CHIP_CD_2004-06.iso/bonus/buhgal/files/M12USWEB.exe/RCDATA/CABINET/money.cab/msmoney.chm/understandtaximplicationsofcapitalgainscashfinder.xml

Extensible Markup Language | 2003-06-18 | 4KB | 37 lines

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<topic sku="core" tNum="288600" author="erinpa" xmlns="x-schema:hhTopicSchema.xml"><index><title>Learn about the tax implications of capital gains</title><category>lifeplan</category><klink type="cncpt">Tell me about the tax implications of capital gains</klink></index>
    <content>
        <p>When you sell an investment for more than you paid for it, you owe the IRS some taxes on your profits. (There are some exceptions to this; for example, if you have <glossary tNum="286962">capital losses</glossary> on other investments, they can offset your gains. A tax professional can help you.) Depending on how long you've owned the investment you're selling, you'll pay either:</p>
        <p><emph>Short-term capital gains tax.</emph> If you've held the investment for one year or less, your capital gains are taxed as ordinary income. Your taxes will be calculated at your <glossary>marginal rate</glossary>. You can determine your marginal rate by clicking <emph>Set tax rates</emph> in the Purchase Wizard or the Capital Gains Estimator.</p>
        <p><emph>Long-term capital gains.</emph> If you've held an investment for more than one year (that is, 366 days or more), the maximum tax rate on any capital gain on that investment is generally 20%. If you are in the 15% tax bracket, the maximum tax rate on any long-term capital gain is 10%.</p>
        <p>You don't pay capital gains taxes on investments you haven't sold. You pay capital gains tax only on profits you've <glossary tNum="287070">realized</glossary>. So, if you're thinking about selling an investment, you need to consider those taxes when you're making your decision.</p>
        <p>If you've put your investment information in your Money file, Money will check the date you bought the investment and calculate your capital gains using the appropriate tax rate.</p>
    </content>
    <footer>
        <extend>
            <tease>Do capital gains matter if I'm just selling investments to buy something?</tease>
            <reveal>
                <p>Yes. If you decide to finance a purchase by selling investments, you'll need to pay <glossary tNum="286960">capital gains</glossary> taxes on any profits you make on the sale. Think of the capital gains taxes as a reduction in the amount you receive from the sale. Will selling investments produce enough cash for you to make your purchase and pay capital gains? The Purchase Wizard can help you find out.</p>
            </reveal>
        </extend>
        <extend>
            <tease>What if I've carried over capital losses from a previous year?</tease>
            <reveal>
                <p>You can offset previous years' capital losses against capital gains you'd earn on an investment sale you're considering. </p>
                <ol>
                    <li>In the Capital Gains Estimator or Purchase Wizard, click <emph>Set tax rates</emph> in the left pane.</li>
                    <li>In the <emph>Short-term loss</emph> or <emph>Long-term loss</emph> boxes, type the amount of capital loss you want to carry over.</li>
                    <li>Follow the instructions on the screen.</li>
                </ol>
            </reveal>
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    </footer>
</topic>