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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.
Selling a stock held 13 months qualifies for lower long-term capital-gains rates.
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.
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