Intro: Capital gains tax is an essential component of the financial landscape that affects investors and individuals who earn income from investments. Whether you are a seasoned investor or just starting your journey, understanding capital gains tax rates and how they impact your investments is crucial. In this comprehensive guide, we will break down the basics of capital gains tax, discuss the different rates, explore what triggers capital gains tax, and provide strategies to save on your tax bill.
What is Capital Gains Tax? Capital gains taxes are the taxes you may have to pay when you sell your investments, such as stocks, bonds, real estate, or other assets, at a profit. It is the tax on the gain or profit you make from the sale.
Long-Term vs. Short-Term Capital Gains Tax Rates Capital gains tax rates differ for long-term and short-term investments. Long-term capital gains refer to assets held for more than one year, while short-term capital gains apply to assets held for one year or less. Generally, long-term capital gains are taxed at a lower rate than short-term gains.