What are capital gains on an investment?

Capital gain is the profit from the sale of an investment. It is expressed as a dollar amount and calculated by subtracting the sale price of an investment from the price originally paid. If you bought one share of stock for $100 and then sold it for $200, you would have realized a capital gain of $100. 

The tax consequences of capital gains may need to be reported on your income tax return and will depend on the tax rate, on how long you owned the investment, and other factors. Short-term investments, or those that were bought and sold within a year, are taxed the same as your regular income. Investments held for more than a year are considered long-term investments and are taxed at a lower rate. Along with other considerations, this may provide an incentive for long-term portfolio investing. Capital gains taxes apply to any kind of asset you sell, including stocks, bonds, real estate, and collectibles.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


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