capital gains or losses at tax time
Transcript, 2 minutes 45 seconds, for use during week of Jan.
Description: Penny and Susan talk about investment
gains and losses
Announcer: Invest Wisely comes to you from Iowa State University
Extension through a grant from the investor Protection trust,
providing investor education on the web at: investorprotection.org.
Susan: Penny, it’s getting to be that time of year, time
to do my taxes. How does buying and selling stocks, bonds,
or mutual funds affect what I owe?
Penny: Susan, stocks, bonds and mutual funds are considered
capital assets, which means that when you sell them you can have
what’s called a capital gain or loss.
Susan: First, let me be sure I understand what you mean by the
terms ‘capital gain’ and ‘capital loss’.
Penny: A capital gain occurs when the asset you’re selling
increases in value between the time you bought it and when you
Susan: Okay. So, that would mean that a capital loss is
when my asset decreases in value?
Penny: yes. Capital gains and losses are also defined
as either short- or long-term. A long-term capital gain
or loss occurs when you own an asset for more than a year before
Susan: What’s the reason for dividing gains and losses
into short- and long-term?
Penny: Short-term gains are taxed differently than long-term
gains. If you’re in the lowest tax brackets--ten
or fifteen percent--your long-term capital gains are taxed at
five percent for 2007. On your 2008 tax returns, if you’re
in the ten or fifteen percent tax bracket, you won’t be
taxed for your long-term capital gains. Everyone
else--those in tax brackets higher than ten or fifteen percent--pay
15% on long-term capital gains.
Susan: How are short-term capital gains taxed then?
Penny: Short-term capital gains are taxed at the same rate as
your regular income.
Susan: What if I have dividend income? How would I be
taxed on that?
Penny: Dividend income from stocks, like income from long-term
capital gains, is taxed at five percent for taxpayers in the
ten and fifteen percent brackets for 2007, at zero percent for
those same taxpayers in 2008 and at fifteen percent for all other
Susan: Thank you, Penny. This is very helpful.
Penny: You’re welcome. And remember, for more information
visit the ISU Extension website at extension.iastate.edu and
look for ‘Invest Wisely.’