Almost everything you own and use for personal or investment purposes is a capital asset. Examples include a home, personal-use items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss. However, not all capital gains are treated equally. The tax rate can vary dramatically between short-term and long-term gains. [Read more...]
As an economic incentive for individuals to save and invest, gains from the sale of capital assets held for at least one year may be taxed at rates lower than ordinary income tax rates.