Capital Gain

Feedback

Feedback
Any time you sell an asset for more than you paid for it, you have made a capital gain. Let's say last year you bought 100 shares at a share price of $10 a share, which means you paid $1,000. The price of those shares is now $15 a share, so the value of the shares is $1,500. If you do nothing, you could say you have made a paper profit of $500, but if you actually sell those shares, you will make a real profit of $500. That profit is called the capital gain. You will probably have to pay capital gains tax on the $500. How much tax you pay depends on how long you owned those shares - if you owned them for over a year, the tax is called "long-term capital gains tax" and is usually less than the basic tax rate you pay. But if you own the shares for less than a year, you pay the same tax that you will probably pay on your regular income. This is called "short-term capital gains." In other words, holding on to an asset for over a year before you sell it usually means you pay less tax on any profit you make. See also Capital Loss.