When an asset, such as a home, car, investment, or piece of jewelry, is sold, a capital loss or gain is realized. A capital loss occurs when an asset is sold for less than its purchase price, while a capital gain describes the sale of an asset for more than its purchase price. Capital gains are taxed at the individual’s marginal tax rate. Individuals whose marginal tax rate is 10% or 15% pay no tax on capital gains. There are many ways to reduce or even eliminate capital gains tax.
You are allowed to reduce the profit of the sale of your primary residence by $250,000 ($500,000 if you are married). You must meet three requirements to qualify for this exclusion, you must:
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