Selling a piece of property or stocks may net you some extra cash, but that money isn’t without strings. When you sell a high-priced asset like that, any money that you receive over what you paid for the item is subject to capital gains tax. This situation may put you in a different tax situation during tax season, so there are provisions in place to ease the capital gains tax burden. Familiarize yourself with some capital gains tax key terms to help you navigate that road.

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Capital gains tax

The capital gains tax is the tax you owe the government on the money you receive from the sale of an asset such as a home or property that is more than what you paid for it originally. For example, if you paid $100,000 for a house 10 years ago and sell it for $150,000, then you pay taxes on that $50,000 you made from the sale.

I recommend: The Library of Economics and Liberty has a very detailed section on what the capital gains tax is and the history behind it.

Capital asset

The object that is the subject of the capital gains tax is the asset, or the capital asset. In addition to real estate and land, these could be things such as investments or the equipment in a manufacturing plant.

I recommend: wiseGEEK.com does a great job of breaking down the definition of a capital asset into everyday language.

Capital gains tax rate

The IRS regulates the amount or percentage of taxes you pay on the difference between the purchase price and the sale price of your asset. Generally speaking, the more money you receive from the sale, the higher the tax bracket you fit into and the more you have to pay. These percentages change occasionally, so it is wise to keep abreast of the current rates if you are planning a sale.

I recommend: If you want to know the current capital gains tax rates, go right to the source and check out IRS.gov.

Basis

Your basis is the price that you originally paid for the asset, which is sometimes adjusted for factors such as inflation.

I recommend: Fairmark.com talks about basis and how it fits into the whole equation of capital gains tax.

Carry back

Being able to carry back means that you can apply losses from one tax year to another to offset capital gains from prior years, canceling out any capital gains taxes you may have paid during that period.

I recommend: FindLaw has this article that gives up-to-date carry back options to consider during tax time.

Carry forward

The sibling of carry back, carry forward, is the exact opposite. This allows you to carry any losses you have to the following years to ease your tax burden of capital gains taxes during the current tax year.

I recommend: Investopedia not only gives you a clear definition of carry forward, but also provides links to related articles to help you broaden your understanding of other factors related to these tax issues.

Most commonly applied to real estate investments, capital gains tax can also be assessed on any asset your business owns that you sell for more than the purchase price you paid. Capital gains tax is not assessed until the property or asset is sold. While you own it, the asset can increase in value at no extra cost to you.

That's why timing is so important when figuring your capital gains tax information. If you can time a large capital gain and offset it with a large capital loss, you can minimize your tax burden.

Consider the following capital gains tax information:

1. The IRS classifies capital gains tax into two different types: short-term or less than 1 year and long-term or more than one year.

2. Even stock that you liquidate must have been owned for a year or you will be responsible for paying a higher tax.

3. You may want to consider selling smaller assets and saving larger capital gains for a time when it's completely financially sound. This can be an inconvenience but can save you at the end of the year on your tax bill.

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Figure your capital gains tax information

You have many different options in financial software when it comes to tracking your investments and subsequent capital gains. Some brokerages will let you download your investment information into your own personal software or they may track your costs for you for an extra fee and at your request.

I recommend: Browse the features available from Tools for Money's net worth calculating software. Or utilize DRIP Wizard investment and tax tracking software.

Find capital gains tax calculators to help you with the math

For a quick look at your financial picture, many calculators exist online to help you crunch the numbers from figuring out the capital net gain to estimating your tax.

I recommend: Use the simple calculator offered by Moneychimp to crank out some fast numbers to estimate capital gains tax. Plug in the appropriate numbers, and AMBAR Financial Group provides detailed calculations including net adjusted basis of selling property, capital gain based on the sale of the property, the projected capital gains tax due and any equity available for exchange.

Work with a capital gains tax provider who can minimize the blow

A tax consultant can help in a strategy to limit your capital gains tax liability by timing purchasing and selling of certain assets. It's always best to avoid a large capital gain until you can even it out with a similar capital loss. To project your capital gains tax, list any assets you're considering liquidating and discuss the list with your advisor.

I recommend: Hippensteel & Associates and Lalor O'Shea are two of your options when it comes to seeking professional advice on minimizing your capital gains tax burden.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You can always keep purchasing throughout the year to offset capital gains tax. Investing in stock is a good strategy that many small businesses utilize.

Capital gains tax is a U.S. tax law which states that you will incur a capital gain any time you sell real property or other asset at a profit, and that you will be taxed on those profits. There are certain situations where you can be exempt from paying a capital gain tax on a house, property or any other asset that is sold at a profit.

Understanding U.S. tax code as it applies to capital gains tax is a critical component of capital gains tax education and training. If you are interested in becoming well-rounded in tax preparation knowledge, then consider the following ways to enhance or further your capital gains education and training.

1. Expand your capital gains tax education and training with blogs to keep up on the latest issues.

2. Enroll in a tax preparation course that incorporates the subject of capital gains taxes.

3. Include capital gains calculations into your tax planning with online calculators to help you estimate how much you will have to pay.

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Locate blogs that discuss capital gains issues to broaden your capital gains education and training

Blogs are a great way to learn about how a particular subject, in this case capital gains taxes, plays a role in our lives. Since capital gains tax is part of the IRS tax code, it is a political hot potato that gets discussed frequently online.

I recommend: The TaxProf Blog discusses the economic effects of capital gains taxation. The Huffington Post discusses political controversies where capital gains taxation is concerned.

Take a course to help you apply capital gains tax education and training to tax preparation

A general course in tax preparation should include a lesson on capital gains taxes. Learning when and how the capital gains tax code must be applied is a critical piece toward completing your capital gains tax education and training.

I recommend: Peoples Income Tax's Income Tax School offers several courses to teach you the ins and outs of tax preparation for businesses. The Tax College offers a step-by-step income tax course with a section entitled "Sale of Investment Property" that covers capital gains taxes.

Use a tax calculator to estimate your capital gains tax requirements

Learning the proper way to calculate, even if just in estimate form, capital gains taxes, is essential to complete your training on the subject. Fortunately, online calculators have taken the hard work out of doing the math. It is important to keep in mind, however, that tax rates for capital gains are subject to IRS rules and may change from year to year.

I recommend: Moneychimp includes a capital gains tax calculator. SmartMoney includes a capital gains worksheet to help provide an estimate on taxes.