Filing Capital Gains On Federal Tax Return 1040

Filing capital gains on a federal tax return 1040 form is reported on line 13 and via Schedule D. Capital gains that have occurred in the tax year are accounted for on the form through this method. A capital gain is any increase in the value of a taxpayer’s investment. Such gain can be realized, making it a short-term capital gain or unrealized, making it a long-term capital gains. Knowing which type of gain is important because it determines the amount of tax that a taxpayer will be assessed.

The Basis for Capital Gains Tax Rate

Capital gains rates are based on a scheduled amount that is published by the IRS. The capital gains rate may be as low as 0 percent and as high as 35 percent, depending on the individual’s tax rate. Determining the amount of capital gains tax to be paid is based on the type of capital gain’s asset being reported. A capital gain that is taken within 1 year (that is the asset is sold within a year after the gain is realized) is considered a short-term capital gain. Such as gain results in a higher rate than a long-term capital gain. A long-term capital gain is one that is generally unrealized as it last more the 1 year.

Completing Schedule D

When a taxpayer completes line 13 on Form 1040, they also must complete Schedule D, Capital Gains and Losses worksheet. The taxpayer will provide information as to the nature of the capital gain property, when acquired, when sold and the amount of gain. Completing the worksheet provides the IRS necessary to ensure that the correct capital gains amount was accounted for and tax applied.