Capital Gains Tax
Tax on profits from selling investments like stocks, bonds, or real estate.
What You Need to Know
Capital gains tax applies when you sell an asset for more than you paid. The tax rate depends on how long you held the investment.
Short-Term Capital Gains (held < 1 year): Taxed as ordinary income (10-37% depending on tax bracket)
Long-Term Capital Gains (held > 1 year):
- 0% tax: Income under $47,025 (single) or $94,050 (married)
- 15% tax: Income $47,026-$518,900 (single) or $94,051-$583,750 (married)
- 20% tax: Income above those thresholds
Example: Buy stock for $10,000, sell for $15,000:
- Held 6 months: $5,000 profit taxed at 22-37% = $1,100-$1,850 tax
- Held 18 months: $5,000 profit taxed at 15% = $750 tax
Strategies to Minimize:
- Hold investments > 1 year for lower rates
- Harvest tax losses to offset gains
- Use retirement accounts (no capital gains tax)
Real Estate Exception: Primary residence gets $250k ($500k married) capital gains exclusion if you lived there 2+ years.
Sources & References
This information is sourced from authoritative government and academic institutions:
- irs.gov
https://www.irs.gov/taxtopics/tc409
Related Calculators & Tools
Put your knowledge into action with these interactive tools:
Capital Gains Tax Calculator
Calculate federal and state capital gains taxes on stocks, crypto, real estate. Compare short-term vs long-term rates and get tax optimization strategies
Crypto Tax Calculator
Calculate cryptocurrency taxes with FIFO/LIFO cost basis tracking - short-term vs long-term gains, mining income, Form 8949 prep
Related Terms in Investment Analysis
Appreciation
The increase in an asset's value over time, whether it's real estate, stocks, or other investments.
Asset Class
A group of investments with similar behavior, risk, and regulatory profiles (e.g., stocks, bonds, cash).
Bond
A fixed-income investment where you loan money to a government or corporation in exchange for regular interest payments.
Bond Yield
The return an investor earns on a bond, expressed as a percentage, which can be calculated as current yield (annual interest ÷ current price) or yield to maturity (total return if held until maturity).
Capital Loss
A loss realized when you sell an investment for less than you paid for it, which can offset capital gains for tax purposes.
Correlation
A value between -1 and +1 that shows how two investments move together—lower correlation improves diversification.