capital gains exemption

A capital gains exemption is a tax benefit that allows individuals to exclude a certain portion of profit from the sale of an asset, such as property or stocks, from taxable income. For example, if you buy a home for $200,000 and sell it for $300,000, you earn a $100,000 profit. If you qualify for an exemption, a portion of that profit may not be subject to income tax, reducing your overall tax burden. This exemption encourages investment and helps individuals keep more of their earnings from successful transactions.