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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