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What is capital gains tax? It is important for many Americans, because even just owning mutual funds can create capital gains tax implications.
Defining a Capital Gain
Simply stated, a capital gain occurs when you buy a certain type of asset, called a capital asset, and you sell it for more than you paid for it.
Capital assets include stocks, mutual funds, real estate, bonds, precious metals and certain types of collectibles, such as coins.
A Different Kind of Tax
The wages you earn and any interest income or dividends you receive are taxed at the rate of your particular tax bracket.
Capital gains are different. There is a separate set of regulations and tax rates for both long-term and short-term capital gains. Short-term capital gains are profits on assets you buy and sell in one year or less. Long-term capital gains are profits on assets you hold for longer than a year.
Benefits from Planning
When you get the facts on what capital gains tax is, you can make decisions about what types of assets to own and how long to own them. Depending on your personal financial plan, when an asset grows in value, knowing the tax implications will help you decide whether to sell it or hold it.
Defining a Capital Gain
Simply stated, a capital gain occurs when you buy a certain type of asset, called a capital asset, and you sell it for more than you paid for it.
Capital assets include stocks, mutual funds, real estate, bonds, precious metals and certain types of collectibles, such as coins.
A Different Kind of Tax
The wages you earn and any interest income or dividends you receive are taxed at the rate of your particular tax bracket.
Capital gains are different. There is a separate set of regulations and tax rates for both long-term and short-term capital gains. Short-term capital gains are profits on assets you buy and sell in one year or less. Long-term capital gains are profits on assets you hold for longer than a year.
Benefits from Planning
When you get the facts on what capital gains tax is, you can make decisions about what types of assets to own and how long to own them. Depending on your personal financial plan, when an asset grows in value, knowing the tax implications will help you decide whether to sell it or hold it.
