Capital Gain
The profit realized from the sale of a capital asset such as stock, real estate, or cryptocurrency, taxed at preferential rates if held longer than one year.
Detailed Explanation
Long-term capital gains (assets held more than one year) are taxed at 0%, 15%, or 20% depending on taxable income, plus a 3.8% Net Investment Income Tax for high earners. Short-term capital gains (held one year or less) are taxed at ordinary income rates. Capital gains and losses are reported on Form 8949 and summarized on Schedule D. Capital losses offset capital gains and up to $3,000 of ordinary income per year, with the remainder carried forward indefinitely.
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Learn about Tax Planning & StrategyRelated Terms
Tax Basis
The amount of investment in an asset for tax purposes, used to determine gain or loss when the asset is sold or otherwise disposed of.
Form 8949 (Sales and Other Dispositions of Capital Assets)
The IRS form used to report each individual sale or disposition of a capital asset, with totals flowing to Schedule D.
Tax-Loss Harvesting
A strategy of selling investments at a loss to offset capital gains and up to $3,000 of ordinary income annually.
Like-Kind Exchange (Section 1031)
A tax-deferred exchange of investment or business real property for similar property under IRC Section 1031, deferring capital gains recognition.
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