12.11.2010

If you're going to invest (whether it's in stocks, real estate or even rare stamps), you have to understand capital gains. After all, whether you win or lose with your picks, mastery of this convoluted part of the tax code can both soften your losses and sweeten your gains.

If you want no more than a good estimate of your cap-gains liability, you probably won't need to go further than this page. With Capital-Gains Tax Estimator you can plug in your gains and losses for investments you sold last year to figure out your tax hit. Keep in mind that this is also a good strategizing tool to use when you're weighing whether or not to sell some shares right now or later this year.

But if you really want to make this complicated corner of the tax code work to your advantage, we've got more reading for you. The first step is to understand at which rate sales are taxed. That depends on your income from other sources, how long you held the asset and what type of asset it is. (Believe it or not, your prized snow-dome collection would most likely be taxed at a higher rate than, say, your mutual-fund shares.) There's a lot to keep track of: While short-term gains are taxed as ordinary income, the taxes on long-term gains (for assets held more than one year) can range from 0% to 28%.

Once you've got the different rates straight, you're ready to strategize by using your losses to offset your gains. To do so, you need to calculate your net loss or gain.

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