Capital Gains

The profit realized from selling an asset for more than its purchase price. In the U.S., capital gains are taxed differently depending on the holding period: short-term gains (assets held less than one year) are taxed at ordinary income rates, while long-term gains enjoy preferential rates of 0%, 15%, or 20%. This tax differential is one of the most powerful incentives in investing and significantly influences how and when investors choose to sell positions.