What are capital gains?
Capital gains are made up of earnings obtained through methods that do not involve “business and professional, capital or property income,” and that instead result from the purchase and sale of real estate, financial products, investment properties, and more.
According to the legislation in force, capital gains can be generated from the repayment of bonds or other debt securities, from the sale of industrial or intellectual property, from real estate or assets, from the termination of credits, from company shares, or other assets provided for in article 10 of the Personal Income Tax Code (IRS).
In short, capital gains are seen as the difference between the purchase and sale price of an asset, that is, the profit generated. In case there is no profit, but a loss, it is considered a loss.
How to declare capital gains on the IRS
Please note that capital gains must be reported to the IRS, as well as your earnings from employment or self-employment. Similarly, will have to declare losses on the IRS, and these losses can help you pay less tax. To declare capital gains or losses on the IRS, you must complete Annex G of Model 3.
In this sense, you should record in the 401 field the amounts involved, such as the acquisition and sale. In fields 501 to 516, you must declare the reinvestment (or intention to reinvest) of the capital gains, including for the amortization of a mortgage loan used to buy the property, explains Doutor Finanças.
No case of the property was purchased before the date of entry into force of the IRS Code (January 1, 1989) surplus value is not subject to tax, you only have to fill in table 5 of annex G1 to declare this income.
On the other hand, if you received the property through an inheritance, the acquisition value of the property to be considered will be your Tax Asset Value (VPT) to the date it was transferred by inheritance.
It should be noted that there are yields that you do not need to declare as capital gains. Interest on time deposits or dividends on national shares does not need to be declared, because the entity that distributes them retains 28% of the value at source.
How are they calculated?
In the case of real estate gains, several data are taken into account:
- Acquisition value;
- Year of acquisition;
- Month of acquisition;
- Realization value (sale);
- Year of realization;
- Realization month;
- Expenses and charges
In the case of expenses and charges, there are expenses with works, improvements or replacement of windows, charges with the real estate, costs of issuing an energy certificate, costs with registrations and deeds, and with the municipal tax on the onerous transfers of properties. These expenses will help to reduce the tax payable with capital gains.
Also Read: Questions on the IRS statement? DECO helps to fill it “step by step”
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