Capital Gains

By Melissa Cook Reviewed by Minh Tong Updated Mar 10, 2023
Capital Gains

Capital gain refers to the profit that an individual or entity realizes when they sell an asset for a price that is higher than the price they initially paid for it. 

In other words, it is the difference between the purchase price of the asset and the price at which it is sold.

Assets that are typically subject to capital gains tax include stocks, bonds, real estate, and precious metals. The tax on capital gains is usually calculated as a percentage of the profit, with the rate varying based on the holding period of the asset and the taxpayer’s income level.

Capital gains can arise from a variety of sources, including the sale of investments, such as stocks, mutual funds, or real estate, as well as the sale of personal property, such as artwork, jewelry, or a second home. 

Capital gains can be either short-term or long-term, depending on how long the asset was held before it was sold.

Short-term capital gains are typically taxed at a higher rate than long-term capital gains. The holding period that distinguishes short-term from long-term capital gains varies depending on the type of asset. 

For example, for stocks and bonds, a holding period of less than one year is considered short-term, while for real estate, a holding period of less than two years is considered short-term.


Melissa Cook

Melissa has a degree in English and marketing from University of California Irvine. She is a creative and accomplished content writer and editor with comprehensive experience developing rich, compelling content for a variety of websites. With her expertise in writing a broad range of content, combined with outstanding interpersonal skills and commitment to exploring innovative ideas, Melissa has done an excellent job developing content for blogs, articles, social media, and the company website. When she is not writing, Melissa spends most of her time cooking, traveling the world, and catching her favorite Broadway shows.