Long-Term Capital Gain or Loss

A long-term capital gain or loss is the profit or loss from the sale of an asset held for more than one year. The holding period begins on the day you acquire the asset and ends on the day you sell it.

Long-term capital gains are taxed at a lower rate than short-term capital gains, which are gains from the sale of an asset held for one year or less. The long-term capital gains tax rate is 0%, 15%, or 20%, depending on your taxable income. The short-term capital gains tax rate is the same as your ordinary income tax rate.

To calculate your long-term capital gain or loss, you must first determine your adjusted cost basis. Your adjusted cost basis is the original purchase price of the asset, plus any costs associated with the purchase, such as commissions and fees. You then subtract your adjusted cost basis from the sales price to determine your gain or loss.

If you have a long-term capital gain, you must report it on your tax return. You can use Form 8949 to report your capital gains and losses. If you have a net capital gain, you must also include it on Schedule D.

There are a few exceptions to the one-year holding period rule. For example, if you sell an asset that you inherited, the holding period begins on the date of death of the person who left you the asset. If you sell an asset that you received as a gift, the holding period begins on the date you received the gift.

Long-term capital gains can be a significant source of tax savings. If you have a long-term capital gain, it is important to understand how it is taxed and to report it correctly on your tax return.