Capital gains
Also called: capital gain, capital gains tax
Capital gains are profits from selling a capital asset, such as stock or fund shares, for more than its adjusted basis, usually what you paid. Gains on assets held more than one year are generally long-term and often taxed at lower rates than short-term gains.
By Beacon · Updated
How it works
A gain or loss is the amount you realized from a sale minus your adjusted basis. Basis generally starts with what you paid for the asset and can be adjusted over time. If the result is negative, you have a capital loss, which can offset capital gains and up to $3,000 of other income a year ($1,500 if married filing separately), with any excess carried forward to later years.
Timing decides the treatment. Selling after owning an asset for more than a year generally makes the result long-term, while holding it one year or less makes it short-term. After gains and losses are netted, short-term gains are taxed at the same bracket rates as wages and other ordinary income, while most long-term gains get lower rates. For 2026, the 0% long-term rate applies up to $49,450 of taxable income, gains included, for single filers and $98,900 for married couples filing jointly.
Capital assets include more than investments: a home, a car and household furnishings count too, but a loss from selling personal-use property like these is not deductible. Keeping purchase dates, prices and later transaction records makes it easier to confirm your basis and holding period, especially if an account has moved between providers over the years.
Related terms
Sources and further reading
- IRS: Topic 409 — Capital gains and losses
- IRS: Internal Revenue Bulletin 2025-45 (Rev. Proc. 2025-32)
Examples are illustrative and focus on U.S. personal finance. This page is educational, not individual financial, investment, tax, or legal advice. Read our editorial approach or report a correction.