What is a Capital Asset?
A capital asset is generally any property you own that is not used in your trade or business as inventory or held primarily for sale to customers. Most personal-use property and investment property fall under this category.
Examples of Capital Assets
- Stocks and bonds
- Real estate (such as your home)
- Cars and furniture used for personal purposes
- Jewelry, coin or stamp collections
- Other investment property
What is NOT a Capital Asset?
- Inventory or property held mainly for sale in the ordinary course of business
- Accounts or notes receivable
- Property used in a trade or business (unless specifically excluded)
Reporting Capital Assets
When you sell or dispose of a capital asset, you may realize a capital gain or loss. These must be reported on your tax return using Form 8949 and Schedule D.
Form 8949 is used to report sales and other dispositions of capital assets, including certain digital assets like Bitcoin. Schedule D summarizes the gains and losses reported on Form 8949.
Important Considerations
- For charitable contributions, certain real property and depreciable property used in a trade or business and held more than one year may be considered capital gain property.
- The basis of a capital asset is important for calculating gain or loss upon sale. Refer to Publication 551 for details on determining basis.
- Special rules apply to certain creative property (e.g., for freelance artists, authors, photographers) under the Uniform Capitalization Rules (see Publication 538).
Source:
Form 8949 - Sales and Other Dispositions of Capital Assets
Schedule D - Capital Gains and Losses
Publication 551 - Basis of Assets
Publication 526 - Charitable Contributions
Disclaimer: Always verify information with the official IRS forms, instructions, and publications, as well as your state Department of Revenue. OLT (Online Taxes) provides guidance based on retrieved context but does not guarantee accuracy for individual circumstances.