Capital Gains Tax
You incur a capital gain when you sell an asset for a profit. This could be anything from land or a house to stocks and bonds. For investing purposes, you figure out your capital gains tax on the difference between your “basis” in the stock and the sales price. Basis is usually what you paid for stock, unless it’s inherited. Ask your tax person for specific details about that. The difference is your profit or loss. You can have long term capital gains or short term capital gains. For long term capital gains have to hold the stock for at least one whole year to qualify for the long-term capital gains rates. A short term capital gain is for stock held for less than a year. The profits are taxed as ordinary income which would make the tax rate higher than if taxed on a long term capital gain. It’s to your advantage to have long term capital gains. Any qualified tax specialist should be able to help you file your taxes appropriately and keep your tax bill to a minimum.