A capital gain is what results when you sell certain property at a profit. In general, everything you own for personal or investment purposes is a capital asset, including your home, stocks, bonds, and collectibles. Capital assets do not include business property, such as inventories, notes, and accounts receivable.
Short-term capital gains occur when you sell property you have owned for less than one year. Any gains from these sales are treated as ordinary income, just like wages.
Long-term capital gains (generally gains on the sale of assets held more than one year) receive more favorable tax treatment than ordinary income. For example, the maximum long-term capital gain rate is currently 20%, whereas the maximum ordinary income tax rate is 37%.
Other capital gains tax rates exist for specific classes of assets like collectibles (e.g. stamps, artwork and coins.)
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