Traverse City, MI-6-26-2019 - Capital gain tax is paid on the profit made from selling your own assets. This tax levy is only due after a sale is made or completed. That is, if the value of your asset most likely a property increases, you are not required to pay the capital gain tax but as soon as you sell your asset then you will need to report it in your tax return.
Depending on a number of factors such as your income, other profit gains, and the number of deductions and credits that are available to you, the capital gain tax can affect your tax bracket. Efile Tax Advisor, a tax advisory blog explains in a recent post how capital gains can affect your tax brackets and clears any confusion taxpayers might have about the capital gain tax.
According to the tax blog, taxpayers who are not in the higher income brackets should not expect their capital gains from home sale to push them into a higher tax bracket if they are selling their house below the threshold of $250,000 for single filers or $500,000 for couples. Also, as long as the profit margin is not above the limit, taxpayers really do not need to file with the government.
The blog also offers scenarios where a taxpayer can avoid paying the capital gains tax or reduce it to the barest minimum. Taxpayers can pay little or nothing at all if their property increases in value every year since it was purchased or if their property has not been sold or exchanged in the last 5 years. This implies that there are higher tax rates for short-term capital gains as compared to long-term capital gains. Homeowners who reinvest their capital gains will get no deductions or credit but the gains can be used to fund other income avenues that are taxed at a rate much lower than most personal incomes.
For more information about the capital gain tax, please visit https://efiletaxadvisor.com/2019/05/09/will-capital-gains-put-me-into-a-higher-tax-bracket/
About Frank Ellis
Frank Ellis is a Traverse City Tax Preparation Planner and published author. He has written tax and finance related articles for eight years and has published over 900 articles on leading financial websites.
Efile Tax Advisor
945 East 8th Street Suite A
Traverse City, Michigan 49686