Capital gains are the profits realized from the sale of an asset, such as stocks, real estate, or other investments, when the sale price exceeds the original purchase price. These gains are typically categorized as either short-term or long-term, depending on how long the asset was held before sale. Short-term capital gains, derived from assets held for a year or less, are usually taxed at ordinary income tax rates, while long-term capital gains, from assets held longer than a year, often benefit from reduced tax rates. The taxation of capital gains varies by jurisdiction and can influence investment strategies and financial planning decisions.
