The capital gains tax is paid as an income tax. The capital gain tax rate is determined after the individual has taken allowable losses and deductions, before adding capital gains to their income.
Capital gains include many types of additional income, including money made at garage sales, and large sales including homes. In addition, capital gains can include income from the sale of stocks. In order to determine the actual capital gain, individuals must first take allowable deductions against the capital gain, such as capital losses.
Capital losses can include the sale of stocks, when the price of the stock was less than what was paid for the stock. However, a car which sold for less that what was paid, would not be considered a capital loss, as the value of a car depreciates. However, if the individual purchased an antique car and sold it for less than what they paid, that sale may count as a capital loss.
Once an individual has determined the full value of capital losses, they can subtract that amount from their capital gains. They may only subtract a value equal to or less than the amount of the capital gains for that year.
However, additional capital losses can be carried over into future years and be used as a deduction until the full value of that loss has been deducted. The capital gains tax rate is then determined when the capital gains are added to the income for that year.