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2021 Tax Planning Guide

Capital Gains Tax

Remember that you pay long-term capital gains taxes on investments held longer than one year, while you pay ordinary income taxes on short-term investment gains. The capital gains tax brackets are based on taxable income, just like the ordinary income tax brackets.


Capital Gains Tax


TREATMENT OF LOSSES
A capital gain or loss is the difference between your basis, which is typically the cost of buying an asset or investment, adjusted by certain previous deductions for depreciation and/or depletion, and what you get for selling it. If your investments have a net capital loss, you can deduct up to $3,000 of the loss against your income annually if filing jointly, ($1,500 married filing separately). If your losses exceed these annual limits, you may carry losses forward to future years, deducting up to $3,000 per year against your income until your capital losses are exhausted.


A WORD ABOUT DIVIDENDS
Qualified dividends are eligible for more favorable capital gains tax rates, while unqualified dividends are taxed as ordinary income. Generally, dividends from real estate investment trusts (REITs) are unqualified, as are those from credit unions and mutual savings banks.


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