capital gains tax

Tax owed on the profit made when an asset is sold. A capital gain is an increase in the value of a capital asset such as common stock. When the asset is sold, the gain is “realized” and taxes are levied. The tax due varies depending on whether the capital gain is short term (asset was held for one year or less) or long term (asset was held for more than one year). Short-term gains are taxed as ordinary income, while the tax rate on long-term gains depends on your taxable income level.