2010 Virginia Legislators' Tax Guide: Capital Gains and LossesLong-term and short-term capital gains and losses are offset against one another to produce net capital gain or loss. Long-term holding period is more than one year and short-term is one year or less. For individual taxpayers, long-term gain may qualify as adjusted net capital gain eligible for maximum tax rate of 15%, or 0% to extent tax payer's taxable income is taxed at a rate below 25%. Some long-term real estate gain qualifies for 25% maximum rate and some other types of long-term gain, such as from collectibles, are subject to 28% maximum rate. Individual taxpayers may deduct up to $3,000 annually of excess capital losses from ordinary income, and capital losses in excess of $3,000 limit may be carried forward indefinitely. Sale of Your Home If you sold or exchanged your main home, do not report it on your tax return unless your gain exceeds your exclusion amount or you received a 1099-S form. Consult your CPA. Generally, if you meet the two tests below, you can exclude up to $250,000 of gain. If both you and your spouse meet these tests and you file a joint return, you can exclude up to $500,000 of gain (but only one spouse needs to meet the ownership requirements in Test 1). Note: Along with this section, you should review the office expenses section of this guide. A taxpayer may not use the principal residence exclusion for any gain related to the depreciation expense claimed for a home office. Test 1: You owned and used the home as your main home for two years or more during the five-year period ending on the date you sold or exchanged your home. If the home was acquired through a 1031 exchange, then it must be the principal residence for a minimum of five years. Test 2: You have not sold or exchanged another main home during the two-year period ending on the date of the sale or exchange of your home. See Publication 523, Selling Your Home, for details, including how to report any taxable gain on Schedule D, if:
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