Long-Term Capital Gains Tax Rates in 2020

When you sell an asset for more than you paid for it, or specifically for more than your cost basis, the net profit is considered to be a capital gain. For a simplified example, if you spend $5,000 to buy shares of a certain stock and sell your position for $7,000, you'd have a $2,000 capital gain.

The way capital gains are taxed depends on how long the asset was owned for. The time period to keep in mind is one year. If you owned the asset for one year or less before selling it, you would have a short-term capital gain. On the other hand, if you owned the asset for at least a year and a day, it would be considered a long-term capital gain.

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Source Fool.com