Long-Term Capital Gain

Long Term Capital Gain Definition

Long term capital gain refers to any profit gained from the sale of a property that a taxpayer have owned for longer than one year.

Explanation

While capital gain refers to any profit gained from selling property, long term capital gain refers to profit that comes from the sale of a property that has been in the taxpayer’s possession for one year or longer.

From the capital gains tax perspective, profits from the sale of a property owned for longer than one year are treated more favorably than profits from property owned for less than 12 months (short term capital gain). Long term capital gains are taxed at a much lower rate than short term capital gains, and the tax rate varies based on the taxpayer’s income bracket.

Long term capital gain is calculated by subtracting the price the taxpayer initially paid for the property from the amount that they received for selling it. This amount will indicate whether the sale resulted in a profit or a capital loss.

In case the property was sold at a loss, the capital loss can be used to reduce the taxable amount of another capital gain in the same year.