Capital Gains Tax Basics

Capital gains tax may apply when you sell an investment or asset for more than your cost basis. The tax result depends on holding period, taxable income, asset type, losses, and special rules.

Short-term vs long-term

Short-term gains are generally from assets held one year or less and are often taxed like ordinary income. Long-term gains generally apply after a holding period of more than one year and may receive different rates.

Cost basis and records

Accurate cost basis is essential. Reinvested dividends, fees, stock splits, crypto transactions, and partial sales can make records more complex.

Losses and other taxes

Capital losses may offset gains, subject to rules and limits. Some taxpayers may also face additional taxes depending on income and asset type.