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Capital Gains Tax
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Capital gains are subject to capital gains tax. A capital gain is the profit earned by selling capital assets (stocks, bonds, real estate) for more than the original purchase price. The amount of capital gains tax depends upon whether the asset is sold short-term (less than one year) or long-term (more than one year). An investor’s federal tax bracket determines what percentage of capital gains tax is applied.
Long-term capital gains tax are subject to a lower rate than short-term gain. Capital gains tax on short-term gains are taxed like regular income. New and changing laws make capital gains tax a complex issue. Something to remember - certain types of long-term gains (collectibles, for one) are subject to a different rate of capital gains tax than real estate or certain other assets.
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