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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Profit you make when you sell an investment for more than you paid.
Why It Matters
Capital gains are how most investors build wealth. If you bought Amazon at $18 during its 1997 IPO and sold today, your gain would be over 10,000%. But timing matters for taxes: hold for over a year and you pay 0-20% tax (long-term); sell sooner and you pay your regular income tax rate (up to 37%).
Key Points
- Short-term gains (held under 1 year) are taxed as ordinary income - could be 22-37%
- Long-term gains (held over 1 year) get preferential rates: 0%, 15%, or 20% depending on income
- You only owe tax when you SELL - unrealized gains (paper profits) aren't taxed until you cash out
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Common Questions
Profit you make when you sell an investment for more than you paid. Capital gains are how most investors build wealth. If you bought Amazon at $18 during its 1997 IPO and sold today, your gain would be over 10,000%.
Capital gains are how most investors build wealth. If you bought Amazon at $18 during its 1997 IPO and sold today, your gain would be over 10,000%. But timing matters for taxes: hold for over a year and you pay 0-20% tax (long-term); sell sooner and you pay your regular income tax rate (up to 37%).
Short-term gains (held under 1 year) are taxed as ordinary income - could be 22-37%
Long-term gains (held over 1 year) get preferential rates: 0%, 15%, or 20% depending on income
You only owe tax when you SELL - unrealized gains (paper profits) aren't taxed until you cash out