Capital Gains

Capital gains are basically the money you earn in interest on any investments (stocks, funds, bond, money markets, etc) you own.

You have to pay taxes on this money.

So if you are congratulating yourself for buying google at $100, you are also probably sad that you owe the government money.

The better your investments do, the more money you owe to the government in taxes. But, as you will see below, one way you can pay less in taxes is if you hold on to your investments for more than one year.

Capital gains are either short-term or long-term:

Short-term capital gains are the money you earned in interest on investments you owned for less than one year.

Long-term capital gains are the money you earned in interest on investments you owned for more than one year.

How much you have to pay the government:

Short-term capital gains: Taxed as ordinary income. (Whichever tax bracket you fall into.)

Long-term capital gains: 15% for all tax brackets except for 5% and 10% tax brackets. (If you are in either of these brackets, you pay a mere 5% long-term capital gains tax.)

What tax bracket are you in? Click here