Capital Gains

Capital gains are the profits you earn when you sell an asset — such as stocks, real estate, or bonds — for more than what you originally paid for it. The difference between the purchase price and the selling price is your capital gain.

For example, if you buy a stock for $100 and later sell it for $150, your capital gain is $50. Capital gains can be classified into two types: short-term and long-term. Short-term capital gains apply to assets held for less than a year and are usually taxed at a higher rate. Long-term capital gains apply to assets held for more than a year and typically enjoy lower tax rates.

Capital gains are an important part of investment returns and play a key role in wealth building over time. Understanding capital gains helps investors make smarter decisions about when to buy and sell their assets.