You must report capital gains or losses in the year you sell the asset. So, to take advantage of generally lower tax rates, it’s recommended that you hold onto your investments for longer. The capital gains tax rate depends on your taxable income and filing status.
On the other hand, long-term capital gains are taxed at a rate between 0-20%. This means that short-term capital gains are taxed at the rate for your income tax bracket. Short-term capital gains, those that you held for less than a year, are taxed as ordinary income. To determine whether you’re reporting a capital gain or loss, you subtract the cost basis (the amount you paid) from the sale price of the asset. Some common assets that are subject to the capital gains tax include stocks, bonds, and real estate.
Capital gains tax is applied to the profit made off the sale of assets.
