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Capital Gains
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.