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What is Capital Gains Tax?

There’s some confusion for some about what the capital gains tax is, especially if they’ve sold an asset or they’re new to trading. It’s a tax that’s levied on the profit an individual makes when they sell an asset or investment. The asset can range from real estate to stocks and bonds. The amount of tax is determined by how much the asset has appreciated in value during the time it was held by the owner.

The rate of tax is also dependent on the filer’s income bracket. The tax can range from 0% to 15% or 20%. A long-term capital gains tax is assessed if an individual has owned the asset for a year or more. Short-term capital gains taxes will apply if the investment has been owned for less than a year and will be taxed according to the individual’s normal tax rate.

Unrealized capital gains refer to unsold investments. It doesn’t matter how much in assets an individual has, how long they’re held, or how much they’ve increased in value. Purchasing or investing in an asset and keeping it over the long term is a way of building wealth that can be passed on to heirs.

Maximizing profitability and minimizing capital gain taxes requires careful, well-though out strategies. For tax purposes, a purchased asset is typically treated the same as if was a salary or wages. The same is true of dividends derived from an asset.

An increasing number of people are using software applications to trade online. The thrill of buying and selling can override any benefits if they’re not aware of the capital gains taxes they’ll have to pay or if they don’t understand IRS laws.

However, taxable gains can be offset by capital losses. A maximum tax of $3,000 per year is levied on net losses. Leftover losses can be carried forward into following tax years.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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5 Reasons a Tax Professional is Better than Online Filing Services

Millions of people across the nation file their taxes each year using popular online software. It’s easy, convenient, and fairly inexpensive. The IRS recommends that individuals use e-file options for their taxes. However, the best solution can be a tax professional. The more complex the tax filing, the more a tax professional makes sense and they can also e-file for clients.

  1. Year-Round Help

Online tax software is only available for a limited time each year and it can’t provide advice on potential tax issues that may arise during the coming year. A tax professional is available to answer questions and concerns at anytime during the year, not just at tax time.

  1. Best Software

Tax professionals have access to better and more sophisticated software than that offered online. An individual’s information can be scanned, entered, and organized quickly and efficiently. The process eliminates manual data entry, significantly reducing the potential for human error.

  1. On Time

Online software depends on individuals buckling down, collecting their information and beginning the task of filing taxes. Fear of a mistake is common among self-filers and it’s exacerbated when the individual happens to be a procrastinator. Provided that individuals get the information to their tax professional in a timely manner, taxes will always be filed on time, thereby eliminating late fees and running afoul of the IRS. Filing via a tax professional may also reduce the potential of an audit.

  1. Business Needs

Complying with new tax laws for operating a business and investments becomes more complicated every year. A tax professional is one of the first to have access to upcoming changes that affect clients’ taxes and livelihood. They have a thorough understanding of tax laws in multiple areas and can guide individuals. Even those with straightforward tax returns will fare better.

  1. Stress

Tax time generates a considerable amount of stress each year and it’s compounded when people try to do their own taxes – even with online software. The changes in tax laws and the COVID-19 pandemic are further confusing requirements. An ordinary tax return can take up to two hours to complete online. A tax professional saves clients time, effort and stress.

At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

Contact Us Today

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