Capital Gains: What Does It Mean?

Capital gains are the profit you make when you sell an investment or asset, like a stock or a home, for more than you paid for it. If you sell for less, it's a capital loss, which can sometimes offset gains at tax time. How a gain is taxed depends on your holding period: assets held one year or less are taxed as ordinary income, while assets held longer than a year qualify for lower long-term capital gains rates. Gains are only taxed once you sell, so an investment that has grown but hasn't been sold is an unrealized gain. Strategies like tax-loss harvesting can help reduce what you owe.