The profit earned from the sale of an investment or asset that has increased in value.
Capital gains refer to the profits realized from the sale or disposition of capital assets, such as stocks, real estate, or business investments. When the selling price of an asset exceeds its original purchase price, the difference represents a capital gain. These gains are generally subject to taxation at specific rates depending on the holding period. In many jurisdictions, long-term capital gains (assets held for more than a year) are taxed at a lower rate compared to short-term capital gains (assets held for one year or less). Small business owners who sell appreciated assets may incur capital gains tax liabilities, impacting their overall financial planning and tax obligations. Understanding capital gains and their tax implications is crucial for effective asset management and maximizing after-tax returns.