Definition

Capital gains tax applies to the profit from selling an asset. Short-term gains, on assets held one year or less, are taxed as ordinary income; long-term gains, on assets held more than a year, get preferential rates of 0%, 15%, or 20%. Holding investments past the one-year mark can sharply lower the tax.

1. Capital Gains Tax: A Plain-English Guide to Rates, Rules, and Strategies

   Capital gains tax applies when you sell an investment for more than you paid. The rate you pay — and how much you can reduce it — depends on how long you held the asset and your total income.
   tax

1. Tax-Loss Harvesting

   Selling investments at a loss to offset taxable gains.
2. Brokerage Account

   A taxable account for buying and selling investments like stocks and funds.
3. Dividend

   A share of company profits paid out to shareholders, usually in cash.