A capital gain is a profit that results from selling your investments, such as stocks, bonds or real estate. In other words, it is the appreciation in value of an asset, that is, the selling price is greater than the original price at which it was bought. The tax rate on capital gain depends on how long the asset was held and the type of asset.
In the U.S., the short-term holding period for investment securities is one year or less. Short-term capital gains are taxed at ordinary income tax rates. The long-term holding period is more than one year. Long-term capital gains are taxed at discounted long-term capital gains rates. The long-term tax rate is either 5% or 15%, depending on your marginal tax bracket.
On the other hand, a capital loss arises if the proceeds from the sale of a capital asset are less than the purchase price.
For more specific information, consult Smart Money's At What Rate Will Your Sale Be Taxed?
