Investing
Capital Gains
The profit realized from selling an asset for more than its purchase price.
Definition
Capital gains are the profits realized when a capital asset (stocks, bonds, real estate, etc.) is sold for a price higher than its purchase price. Short-term capital gains (assets held less than one year) are taxed as ordinary income, which can be as high as 37%. Long-term capital gains (assets held more than one year) receive preferential tax rates of 0%, 15%, or 20% depending on your income level. Capital losses can offset capital gains, and up to $3,000 of net capital losses can be deducted against ordinary income annually. Tax-loss harvesting is a strategy that deliberately realizes losses to offset gains.