Definition
Profits from selling assets held more than one year, taxed at preferential rates (0%, 15%, or 20%).
Where you’ll meet it
How much will I actually keep after taxes?
See it in Selling a rental · Step 3About this term
Long-term capital gains rates are significantly lower than ordinary income rates. Rates depend on income level. Critical to hold investments over 1 year.
Pro Tip
Plan to hold investments over 1 year to qualify for long-term rates; time sales strategically.
Example
Selling investment property held 3 years with $100,000 gain taxed at 15% long-term rate rather than 37% ordinary rate.