Capital Gains
Definition
The profit earned from selling a capital asset (stocks, bonds, real estate, etc.) for more than its purchase price. Short-term capital gains (assets held less than one year) are taxed at your ordinary income rate. Long-term capital gains (held over one year) are taxed at preferential rates of 0%, 15%, or 20% depending on your taxable income.
Example
You buy 100 shares of stock for $5,000 and sell them 18 months later for $8,000. Your long-term capital gain is $3,000, which would be taxed at 0% or 15% for most taxpayers.
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