The tax comes in when you decide to sell or trade any of your capital assets and make a profit. The difference in what you paid for the asset and what you sold or traded it for is the capital gain and that is what is taxed.



One of the good things about this tax is that when you lose money on items like your home, car, jewelry, art or other personal capital assets, you will not have to pay a tax on them. But if you make any type of profit what so ever the government wants its cut.

The amount will vary depending on how much profit is made and what the item is. As an example, if you take out money from your 401k savings for an unauthorized reason, the government will consider it a capital gain and will tax you 40%. This seems unfair and it is but you have no choice. The government needs to conduct business and pay its officials so it's up to you the tax payer to support them.

Capital gains and losses are reported on line 13 of the 1040 form. This is after they are figured by following the instructions and filling out a schedule D. For most capital gains the taxes are reasonable. For the year 2006 they ranged from 5% to 28%.

It down to the old saying the more you make the more the tax man takes away. And the IRS capital gains tax is just another way the government separates you from your money.