The American Taxpayer Relief Act of 2012 made several key changes to capital gains taxes for the 2013 tax filing year. It is vital that everyone with investments understand exactly what capital gains are and what these changes entail before you file this year’s taxes. This will greatly reduce any chance of having unexpected expenses or an audit.
What is a capital gain according to the IRS?
Capital gains are the amount of money you make when you sell any personal or investment property you own. This property could be real estate, household furnishings or electronics, or bonds and stocks. If you have sold any of these things in the tax year prior to the IRS tax return filing dates, you will have to declare the capital gains or losses.
The IRS describes both short and long-term capital gains. If you have owned the property for less than one year, the money you get from the sale is a short term gain. If you have owned the asset for longer, it is considered long-term. These different types of capital gains require different tax payments. In order to report these correctly, always keep track of when you purchased property and investment funds.
What are the changes in the 2013 capital gains tax?
Short term capital gains have seen no changes for 2013. You are still taxed for them according to your tax bracket. You can learn about the amounts and fees in the IRS’s usual literature.
Long-term capital gains have changed this year. If you are in the 10 to 15% tax bracket, 0% of capital gains and dividends are taxed. If you are in a tax bracket from 25 to 35%, you will pay a 15% tax on any gains. The new 39.6% tax bracket, which includes people earning over $400,000 per year, are required to pay 20% tax on their long-term capital gains. There are different income levels for single people filing as both single and head of household and for married people who file joint returns.
A 3.8% Medicare tax on capital gains has been added in 2013 if you have earned over $200,000 and are filing as a single person, or $250,000 if you are married and filing jointly.
Any capital gains or losses, either short or long term, require different tax forms to be filed with your return. You must file schedule D and form 8949. These help you list the capital gains and losses from all your funds or property transactions so the IRS can clearly understand what you need to pay and if you are paying the right amount.
Due to 2012’s fiscal cliff tax changes, the highest earning taxpayers in America have a considerable amount of changes in 2013. Study tax forms and instructions carefully to make sure you file your taxes correctly and pay everything the Federal government wants from you. Not only has the income tax rates gone up, but there is now a 0.9% Medicare tax on wages and a move away from potentially itemized deductions and exemptions for 2013 tax years and beyond.
How TurboTax Can Help
When you file your taxes with TurboTax we help you get your biggest refund by asking you simple questions, showing you which tax credits and deductions you qualify for and recommending the best choices for maximizing your refund. Try their free tax refund calculator to see how big your refund will be.
Remember, when you file your taxes with TurboTax, you don’t need to know which tax forms to fill out. We’ll ask you simple questions about your life and put your answers on all the appropriate IRS tax forms.