Definition
Tax on profit from selling an asset at price higher than purchase price (cost basis).
Where you’ll meet it
What is this home for, honestly?
See it in Buying a second home · Step 1About this term
Capital gains tax rates are 0%, 15%, or 20% depending on income. Long-term gains (held 1+ year) taxed at preferential rates. Short-term gains taxed as ordinary income.
Pro Tip
Plan sales timing; long-term capital gains rates are significantly lower than short-term rates.
Example
Selling investment property purchased for $300,000 for $400,000 results in $100,000 capital gain taxed at 15% long-term rate.