What are capital gains?

What are capital gains?

Capital gains are the profits from the sale of an asset, like stocks or real estate, that has increased in value.

How are capital gains taxed?

Capital gains are typically taxed at different rates depending on how long you've held the asset—short-term or long-term.

What is the difference between short-term and long-term capital gains?

Short-term capital gains apply to assets held for one year or less, taxed at ordinary income rates, while long-term gains apply to assets held longer, usually taxed at lower rates.

Can you give me an example of capital gains?

Sure! If you bought a stock for $100 and sold it for $150, your capital gain would be $50.

Are there any exemptions for capital gains tax?

Yes, there are exemptions, such as the primary residence exclusion, where you may not pay taxes on gains from selling your home under certain conditions.