What Kind of Property Qualifies for the Capital Gains Tax?
Most property not used in business
In general, the gain on the sale of any property except property used in business or sold as business inventory, would be classified as a capital gain. There are some exceptions, such as gains on collectibles, certain commodities derivatives and hedging transactions. Even the sale of your car could fall under the capital gains tax, if you sell the car for more than your tax basis in the vehicle.
Property must be owned for more than a year
Not all capital gains are taxed at the capital gains tax rates, though. To qualify for capital gains tax rates, it must be considered a long term capital gain, meaning you must have held or owned the property for more than one year before you sold it. Holding the property for even a day less than one year will cause the gain on your sale to be classified as a short term capital gain which will be taxed at ordinary income tax rates.
Mutual fund distributions
If you own mutual funds or a real estate investment trust (REIT), your fund may make a capital gain distribution. If so, it will be separated and labeled on your yearly FORM 1099-DIV (Box 2a). You can report this part of your mutual fund income as a long term capital gain and receive the benefit of the capital gains tax, regardless of how long you owned the mutual fund or REIT before receiving the distribution.
Qualified dividends, (from Box 1b of your Form 1099-DIV) although technically not classified as a capital gain, will also be taxed at the more favorable capital gains tax rates.