Capital Gain and Loss

A capital gain occurs when an investor sells an asset—such as stocks, bonds, or real estate—for more than the purchase price, resulting in a profit. Conversely, a capital loss happens when the asset is sold for less than the purchase price.

Capital gains are categorized as short-term (held for one year or less, generally taxed at higher rates) or long-term (held for more than a year, typically taxed at lower rates). Investors use capital gains strategies to minimize tax liability, such as tax-loss harvesting, where losses offset gains. This is important to know for investors and options traders alike!