What Is a Capital Gain?
A capital gain is the profit from selling an investment for more than you paid. Short-term versus long-term gains, how they're taxed in the US, and how losses offset them.
In one sentence
Capital gain. The profit when you sell an investment for more than you paid for it, adjusted for certain costs. Selling for less gives a capital loss.
How it works
Capital gain = Sale price − Cost basis
The gain only counts for tax when you sell; until then it's unrealized. The holding period decides the rate: if you hold an investment for one year or less, the gain is short-term; longer than that, it's long-term.1
| Bought 100 shares at $60 | $6,000 cost basis |
|---|---|
| Sold 100 shares at $100 | $10,000 |
| Capital gain | $4,000 |
| Held one year or less | Short-term: taxed as ordinary income |
| Held more than a year | Long-term: taxed at lower capital gains rates |
US rates and losses
Long-term gains are taxed at lower rates than ordinary income, and the rate on most long-term gains is no higher than 15% for most people.1 For 2026, a single filer's long-term gains are taxed at 0% on taxable income up to $49,450.2 Losses offset gains, and up to $3,000 of net losses a year can offset other income, with anything beyond that carried forward to later years.1
Learn it properly
- Taxable vs. Tax-Advantaged AccountsPart 1: Foundations · Free
- Realized Gains, Unrealized Gains, and Cost BasisPart 6: Strategy, Behavior, Accounts, and Taxes · Free
Notes and sources
- Internal Revenue Service. Topic no. 409, Capital gains and losses. Checked 2026-09-30. Back to text
- Internal Revenue Service. Revenue Procedure 2025-32: 2026 inflation-adjusted tax brackets, capital gains thresholds, and standard deductions. Checked 2026-10-06. Back to text