Long-Term Capital Gain Or Loss

What is a 'Long-Term Capital Gain Or Loss'

A long-term capital gain or loss is a gain or loss from a qualifying investment owned for longer than 12 months and then sold. The amount of an asset sale that counts toward a capital gain or loss is the difference between the sale value and the purchase value. Long-term capital gains are assigned a lower tax rate than short-term capital gains in the United States.

BREAKING DOWN 'Long-Term Capital Gain Or Loss'

Capital gains and losses can be netted out in any given tax year and up to the first $3,000 of any net gain or loss can be carried over into future years.

For example, let's say that an investor sells three stocks during the calendar year, all of which were held for several years. The first stock is sold for a loss of $3,000, the second is sold for a $2,500 gain and the third is sold for a $4,000 gain. If the investor makes no other sales during the year, he will have a net gain of $3,500 for the year (-$3,000 + $2,500 + $4,000 = $3,500). The first $3,000 of long-term gains could be carried over into the next year, but the remaining $500 in gains would be taxed that year at the prevailing rate.

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RELATED FAQS
  1. Are capital gains taxed differently in different countries?

    Learn about capital gains taxes in the Unites States as well as those of other countries, where these tax rates vary significantly. Read Answer >>
  2. How do I avoid paying excess taxes on securities I have sold?

    If you dispose of securities during the tax year, the profit or losses from the transaction are either capital gains or losses. ... Read Answer >>
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  5. When would I have to fill out a Schedule D IRS form?

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    It is true in most cases. When you sell your home, the capital gains on the sale are exempt from capital gains tax. Based ... Read Answer >>
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