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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
The profit you make when you sell an investment for more than you paid for it.
Why It Matters
Capital gains are one of the two ways stocks make you money (the other is dividends). When you buy Apple at $100 and sell at $150, that $50 profit is your capital gain. The tax treatment matters: hold over a year and you pay lower 'long-term' rates (0-20%); sell sooner and you pay your regular income tax rate (up to 37%).
Key Points
- Short-term gains (held < 1 year) are taxed as ordinary income
- Long-term gains (held > 1 year) get preferential tax rates of 0%, 15%, or 20%
- You can offset gains with losses to reduce your tax bill
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Capital Gains Explained
Get a complete explanation with examples, key takeaways, and a quiz to test your knowledge.
Related Terms
Common Questions
The profit you make when you sell an investment for more than you paid for it. Capital gains are one of the two ways stocks make you money (the other is dividends). When you buy Apple at $100 and sell at $150, that $50 profit is your capital gain.
Capital gains are one of the two ways stocks make you money (the other is dividends). When you buy Apple at $100 and sell at $150, that $50 profit is your capital gain. The tax treatment matters: hold over a year and you pay lower 'long-term' rates (0-20%); sell sooner and you pay your regular income tax rate (up to 37%).
Short-term gains (held < 1 year) are taxed as ordinary income
Long-term gains (held > 1 year) get preferential tax rates of 0%, 15%, or 20%
You can offset gains with losses to reduce your tax bill