Hey guys. Having a bit of trouble finding the difference between these. Please tell me if I have this right.
If you buy a property or stocks and they go up in value and you sell them later, this is a capital gain and you are taxed on 1/2 the gain. i.e. if the total capital gain is 100K, you pay tax on 50K. A capital loss is also only 1/2 deductable - so if you lose 120K, then only 60K can be deducted, BUT only against your capital gains. Any left over can be carried back or forward to other years to deduct against capital gains of those years. Now, lets say you have a net capital gain of 150K in a year, and so 75K is taxable capital gains.. Is this added to your regular income for the purposes of the tax brackets in the progressive tax system? As in, if you already make 200K in regular income, is every dollar of this 75K of capital gains taxed at the highest marginal rate?
In contrast, how does a capital expenditure (e.g. payment on account of depreciation of asset, or depreciation of asset itself) work? Does that affect your capital gains or regular business income? And is it fully deductable or only 1/2 deductable?
Thank you!
If you buy a property or stocks and they go up in value and you sell them later, this is a capital gain and you are taxed on 1/2 the gain. i.e. if the total capital gain is 100K, you pay tax on 50K. A capital loss is also only 1/2 deductable - so if you lose 120K, then only 60K can be deducted, BUT only against your capital gains. Any left over can be carried back or forward to other years to deduct against capital gains of those years. Now, lets say you have a net capital gain of 150K in a year, and so 75K is taxable capital gains.. Is this added to your regular income for the purposes of the tax brackets in the progressive tax system? As in, if you already make 200K in regular income, is every dollar of this 75K of capital gains taxed at the highest marginal rate?
In contrast, how does a capital expenditure (e.g. payment on account of depreciation of asset, or depreciation of asset itself) work? Does that affect your capital gains or regular business income? And is it fully deductable or only 1/2 deductable?
Thank you!