Your capital gain is the profit you make when you sell an asset for more than you paid for it.
Here's a simple example:
- You buy a stock for $100.
- You sell the stock for $150.
- Your capital gain is $50 ($150 - $100).
Capital gains can be taxed, but the tax rate depends on several factors, including:
- The type of asset: Real estate, stocks, and collectibles are all treated differently for tax purposes.
- How long you held the asset: Short-term capital gains (held for less than a year) are generally taxed at a higher rate than long-term capital gains (held for a year or more).
- Your income level: The tax rate on capital gains can vary depending on your overall income.
Understanding capital gains is important for tax planning. It's best to consult with a tax professional to determine how capital gains will impact your individual tax situation.
