Capital gains is the profit realized from the sale of an asset, such as stocks, bonds, or real estate, that has increased in value since it was purchased. It is taxed at a different rate than ordinary income.
Capital gains refer to the profits made from the sale of an asset, such as stocks, bonds, real estate, or other investments. When an asset is sold for more than its purchase price, the difference between the two amounts is considered a capital gain. Capital gains are taxed differently than ordinary income, and the rate of taxation depends on the type of asset and the length of time it was held.
Capital gains can be short-term or long-term. Short-term capital gains are profits made from the sale of an asset held for one year or less. These gains are taxed at the same rate as ordinary income. Long-term capital gains are profits made from the sale of an asset held for more than one year. These gains are taxed at a lower rate than ordinary income.
Capital gains can also be classified as realized or unrealized. Realized capital gains are profits made from the sale of an asset. Unrealized capital gains are profits made from the appreciation of an asset without selling it. For example, if you own a stock that increases in value, you have an unrealized capital gain until you sell the stock.
Capital gains can be used to offset capital losses. Capital losses occur when an asset is sold for less than its purchase price. These losses can be used to offset capital gains, reducing the amount of taxes owed.
Capital gains can also be used to reduce taxable income. If an investor has a large capital gain, they can use it to reduce their taxable income. This can be beneficial for investors in higher tax brackets, as it can reduce their overall tax liability.
In summary, capital gains refer to the profits made from the sale of an asset. These gains can be short-term or long-term, realized or unrealized, and can be used to offset capital losses or reduce taxable income.