Long-term vs Short-term Capital Gains

Capital gains refer to the profit you make from selling an asset, like stocks or real estate. Long-term capital gains are profits from assets held for more than one year and are typically taxed at lower rates, encouraging longer investment. Short-term capital gains arise from assets sold within a year and are usually taxed at ordinary income rates, which can be higher. Understanding the distinction is essential for tax planning and investment strategies, as it can significantly impact your overall tax liability.