A capital gain tax in Louisiana occurs when you profit from selling investments meaning you sold it for more than you paid for it.
For example, if you bought a house $130,000 and sold it for $160,000.00, you would have to report $30,000 in capital gains. If the house sold for less than you paid for it, it counts as a capital loss.
Examples Of Capital Gains
The IRS states most anything you own could be a capital asset, which includes stocks, bonds, mutual funds, jewelry, stamps, and coins.
Business income does not count as capital gain, and capital gain rates can be more or less based on marital status. Withholding tax is not automatically deducted from capital gains, and money from sales must be reported quarterly. In 2015, Louisiana had the 29th highest capital gains tax rate in the country. Here is some more information on capital gain tax in Louisiana.
Capital Gains Cost Basis
To figure the cost basis, you add any additional costs you paid for to the original price, which includes expenses, such as shipping costs, excise tax, testing, installation, and revenue stamps.
For inherited property or items, the cost basis is calculated based on the worth of the item when the original owner died. The basis cost of a gifted investment is the original value of the asset.
If you make improvements, it increases the basis, which can lower capital gains tax. However, some adjustments to an item or investment can increase taxes.
Furthermore, you have to exclude losses or expenses you took as deductions the previous year, such as theft losses, vehicle credits, or energy credits.
It is important to know the holding period of investments when you report taxes. The holding period is how long you have owned the investment, and it is divided into short-term and long-term.
Short-term holds mean assets you have owned for less than one year, and you pay more taxes on these. Stocks, bonds, and certificate of deposits are an example of short-term assets. The tax rate on short-term assets can be as much as 20%, and it equals the federal margin tax rate.
The IRS favors long-term holds, or investments you hold for at least one year. If your income tax bracket is in the lower percentile, you don’t commonly have to pay taxes on long-term hold, and they have fixed rates. Long-term assets are further divided into super-long term assets, which are held five years or longer.
Investing can be profitable, but you don’t want to forget taxes. The more you know about capital gains taxes in Louisiana, the less you pay.