Capital Gains Tax Basics
A capital gain generally occurs when an asset is sold for more than its adjusted basis.
Short-term and long-term gains
Holding period can affect tax treatment. Short-term gains and long-term gains may be taxed under different rules.
Adjusted basis
Basis often begins with purchase cost and may be adjusted for fees, improvements, reinvestments, or other events.
Capital losses
Losses may offset gains, subject to applicable rules and limits. Unused losses may carry forward in some situations.
Records to keep
- Purchase confirmations
- Sale confirmations
- Reinvestment records
- Improvement costs
- Prior-year carryforward information