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CAPITAL GAINS

business capital capital gains investing property growth tax wednesday word of the week Aug 05, 2020

Definition
Capital gains are the profit from a sale of property or an investment

Why It's Important
When you have investments, you are not taxed until you have capital gains.  Capital gains are only triggered when you make a sale at a profit.  This is the opposite of realized loss.  With both situations, a sale is what triggers each tax treatment.  Capital gains are a good problem to have because that means you are making money!  

There are two types of capital gains, long-term and short-term.  Short-term capital gains are taxed at your current tax rate.  Short-term means that you held the investment for less than a year (generally a no-no).  Long-term capital gains are after you have held your investments for longer than a year.  These get preferable tax treatment.  For instance, if I was a single tax filer and made $45,000, my short-term capital gains rate would be 22% while my long-term rate would be 15%.  See the difference!  As a general rule of thumb, hold your investments at least a year before you sell.

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