Knowing the IRS capital gains tax is quite crucial whether you are an Indian living or working in the United States. This tax is due when you profitably sell an asset—such as mutual funds, shares, or real estate. The US’s Internal Revenue Service, or IRS, is the tax agency with unambiguous policies regarding capital gains taxation.
Capital Gains Tax is What?
Profit you get when you sell something for more than what you paid for it is known as capital gain. Charged on this profit is the IRS capital gains tax. For instance, you pay $1,000 for shares then sell them for $1,500. You have to pay tax on your 500-dollar capital gain.
Several Forms of Capital Gains
The IRS separates capital gains into two categories:
- Gains from Short-Term Capital
Should you sell an asset one year after purchase, it is taxed in line with your regular salary. Based on your income, it could be as high as 37%. - Long-Term Gains in Capital
If you sell following more than a one-year ownership period, depending on income, tax rates are lower—0%, 15%, or 20%. Living in the US, most Indian investors fit the 15% range.
Which Assets Are Liable for Taxes?
The IRS capital gains tax applies to:
- Securities and mutual funds
- Real estate
- Digital currencies
- Coins or artwork (among collectibles)
- Business resources
Particular Guidelines for Real Estate
Should you sell your house, you might be entitled to a tax break. For single persons, the first $250,000 of profit is tax-free. For married couples, that is $500,000. This only holds true, though, if at least two of the past five years you have lived primarily in this house.
Capital Losses May Be Useful
Selling anything at a loss could lower your taxable gains. Using up to $3,000 of capital losses annually will help to reduce your income. One can carry forward extra losses to next years.
Vital Advice for Americans from India
- Record when you purchased and sold assets.
- When you turn in your US tax return, report all gains and losses.
- If you pay taxes in India as well, be cautious; you might be qualified for a credit.
- Use tax programs or consult a CPA knowledgeable in US and Indian tax laws.
Finish
Every Indian making an investment in the US is liable to capital gains tax by the IRS. Good financial planning depends on knowing your tax due amount and whether your gain is temporary or long-term. Smart planning will help you reduce taxes and retain more of your earnings.