Almost everything you own and use for personal or investment purposes is a capital asset. Examples of capital assets include a home, personal-use items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss. Generally, an asset's basis is its cost to the owner, but if you received the asset as a gift or inheritance, refer to Publication 551, Basis of Assets for information about your basis. You have a capital gain if you sell the asset for more than your adjusted basis. You have a capital loss if you sell the asset for less than your adjusted basis. Losses from the sale of personal-use property, such as your home or car, aren't tax deductible.

To correctly arrive at your net capital gain or loss, capital gains and losses are classified as long-term or short-term. Generally, if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. For exceptions to this rule, such as property acquired by gift, property acquired from a decedent, or patent property, refer to Publication 544, Sales and Other Dispositions of Assets ; for commodity futures, see Publication 550, Investment Income and Expenses ; or for applicable partnership interests, see Publication 541, Partnerships . To determine how long you held the asset, you generally count from the day after the day you acquired the asset up to and including the day you disposed of the asset.

If you have a net capital gain, a lower tax rate may apply to the gain than the tax rate that applies to your ordinary income. The term "net capital gain" means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss for the year. The term "net long-term capital gain" means long-term capital gains reduced by long-term capital losses including any unused long-term capital loss carried over from previous years. The term “net short-term capital loss” means the excess of short-term capital losses (including any unused short-term capital losses carried over from previous years) over short-term capital gains for the year.

Amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony or separate maintenance payments for federal tax purposes.

A payment is alimony or separate maintenance if all the following requirements are met:

The spouses don't file a joint return with each other;

The payment is in cash (including checks or money orders);

The payment is to or for a spouse or a former spouse made under a divorce or separation instrument;

The spouses aren't members of the same household when the payment is made (This requirement applies only if the spouses are legally separated under a decree of divorce or of separate maintenance.);

There's no liability to make the payment (in cash or property) after the death of the recipient spouse;

The payment isn't treated as child support or a property settlement; and

The divorce or separation agreement does not designate the payment as not includable in gross income of the payee spouse and not allowable as a deduction to the payer spouse.

Not all payments under a divorce or separation instrument are alimony or separate maintenance. Alimony or separate maintenance doesn't include:

Child support,

Noncash property settlements, whether in a lump-sum or installments,

Payments that are your spouse's part of community property income,

Payments to keep up the payer's property,

Use of the payer's property, or

Voluntary payments (that is, payments not required by a divorce or separation instrument).

Child support is never deductible and isn't considered income. Additionally, if a divorce or separation instrument provides for alimony and child support, and the payer spouse pays less than the total required, the payments apply to child support first. Only the remaining amount is considered alimony.

Interest is an amount you pay for the use of borrowed money. Some interest can be claimed as a deduction or as a credit. To deduct interest you paid on a debt, review each interest expense to determine how it qualifies and where to take the deduction.

When you prepay interest, you must allocate the interest over the tax years to which the interest applies. You may deduct in each year only the interest that applies to that year. However, an exception applies to points paid on a principal residence, see Topic no. 504 .

Types of interest deductible as itemized deductions on Schedule A (Form 1040, Itemized Deductions) include:

Investment interest (limited to your net investment income; see Publication 550, Investment Income and Expenses ) and

Qualified mortgage interest including points (if you're the buyer); see below.

Types of interest deductible elsewhere on the return include:

Student loan interest as an adjustment to income on Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors (attach Schedule 1 (Form 1040), Additional Income and Adjustments to Income PDF ). See Topic no. 456 , Publication 970, Tax Benefits for Education and Can I claim a deduction for student loan interest?

Non-farm business interest (this may be limited). See Publication 334, Tax Guide for Small Business

Farm business interest. See Publication 225, Farmer's Tax Guide

Interest incurred to produce rents or royalties (this may be limited). See Publication 527, Residential Rental Property

Types of interest not deductible include personal interest, such as:

Interest paid on a debt incurred on or prior to December 31, 2024, to purchase a car for personal use.

Credit card and installment interest incurred for personal expenses.

Points (if you're a seller), service charges, credit investigation fees, and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities.