Capital Gains

Quick Answer

The profit from selling an asset for more than you paid for it.

Definition

The profit from selling an asset for more than you paid for it.

Explanation

Short-term gains (held ≤ 1 year) taxed as ordinary income (up to 37%). Long-term gains (held > 1 year) taxed at 0%, 15%, or 20%. Holding investments longer significantly reduces tax impact.

Capital losses can offset gains. Up to $3,000 net loss deductible against ordinary income annually, with unlimited carryforward.

Example

Buy stock for $10,000, sell for $15,000 after 18 months. Long-term capital gain = $5,000. Tax at 15% = $750.

Frequently Asked Questions

What is Capital Gains?

The profit from selling an asset for more than you paid for it.

How does Capital Gains work?

Short-term gains (held ≤ 1 year) taxed as ordinary income (up to 37%). Long-term gains (held > 1 year) taxed at 0%, 15%, or 20%. Holding investments longer significantly reduces tax impact.Capital losses can offset gains. Up to $3,000 net loss deductible against ordinary income annually, with unlimited carryforward.