Capital Gains Tax
TaxGlossary term
Definition
A tax on the profit from selling an asset that has increased in value. Short-term capital gains on assets held less than a year are taxed as ordinary income, while long-term gains on assets held over a year receive preferential lower rates.
Related terms
- Capital GainsThe profit realized from selling an asset for more than its purchase price. Capital gains can be short-term (held less than a year) or long-term (held more than a year), with different tax implications.
- Capital LossA loss incurred when selling an asset for less than its purchase price. Capital losses can offset capital gains to reduce tax liability.
- Tax-Loss HarvestingA strategy of selling investments at a loss to offset capital gains and reduce tax liability. Harvested losses can offset gains dollar-for-dollar, and up to $3,000 of excess losses can be deducted against ordinary income each year.
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