Capital gains (or losses) are recognized when you sell a capital asset. A capital asset is almost everything you own and use for personal, pleasure or investment purposes.
Capital gains are categorized either as short term, held less than one year or long term, held for one year or more. Long term gains have beneficial treatment in the US tax structure since they are taxed currently at 15% where short term gains are taxed at the individual’s tax rate which can be much higher. One exception to the rule is the treatment of stock options under section 1256 where gains or losses open at the end of the year or terminated during the year are treated as 60% long term and 40% short term regardless of how long the contracts were held.
We all know taxes are very tricky so there are exceptions to most rules and we encourage always seeking the guidance of a professional. Check out our webinar on Thursday, January 22, 2015 with Kim Landry, CPA to discuss “Taxes; The Good, The Bad and The Ugly” and she will help clarify some of the tax laws for us.
What tax strategies are you planning on using in 2015?