• Capital gains are reported on your income tax forms.tax forms image by Chad McDermott from Fotolia.com
  
  A capital gain is the amount of profit you make when you sell an asset, such as a home or an investment. The IRS has specific rules regarding taxes on capital gains. They are based on the type of asset sold as well as your income and the length of time you owned the asset. Capital gains are reported on Schedule D of Form 1040.
  
  

Long-Term Capital Gains

• If you owned the asset for more than a year before selling it, the IRS considers any profit from the sale a long-term capital gain. Long-term gains have a more favorable tax status than a short-term capital gain. Depending on your income tax bracket, the tax rate on long-term capital gains currently ranges from 0 to 15 percent.
  
  

Short-Term Capital Gains

• If you owned the asset for less than a year before selling it, the IRS considers any profit from the sale a short-term capital gain. Depending on your income tax bracket, the tax rate on short-term capital gains currently ranges from 10 to 35 percent.
  
  

Exceptions

• You can currently make up to $250,000 on the sale of your home without being subject to capital gains taxes if you owned and lived in the home for at least two of the five years before the sale, and hadn't excluded the gain from the sale of another home in the past two years. If you jointly own the home with another person, you each can exclude up to $250,000. This means that a couple who own a home together can make up to $500,000 on its sale without having to pay capital gains taxes.
  Other exceptions include a maximum tax rate of 28 percent on the profit from the sale of certain types of small businesses and collectibles, and a maximum rate of 25 percent on the sale of certain types of real property.