Capital Gains

Capital gains occur when an investor sells an asset at a higher price than they paid. The gain is realized only upon sale, while an increase in value without selling is called an unrealized gain. The opposite of a capital gain is a capital loss, when an asset is sold at a lower price than the investor paid.

Types of capital gains

• Short-term capital gains: profits from assets held for less than a year (taxed at regular income rates).
• Long-term capital gains: profits from assets held for over a year (usually taxed at lower rates).

Capital gains tax implications

Tax rates on capital gains vary by country and whether the gains are short or long-term. Investors may also offset capital gains tax with documentation of capital losses.