Capital Gain

What is Capital Gain? — Definition

A capital gain is the increase in value of an investment when it is sold. If you buy a stock at $50 and sell it at $80, your capital gain is $30 per share. Capital gains are either short-term (held less than one year) or long-term (held more than one year), with long-term gains taxed at a significantly lower rate in most jurisdictions.

In the U.S., long-term capital gains tax rates are 0%, 15%, or 20% depending on income, while short-term gains are taxed as ordinary income (up to 37%). This tax advantage makes holding investments longer extremely powerful, especially when combined with compounding.

Example

If you bought Amazon in 2010 at around $130 per share and held through 2021, your gain per share was approximately $3,400 — a 2,500%+ return. Held long-term, the tax rate on that gain would be 15–20% rather than up to 37%.

Tracking capital gains efficiently using the BMInsider Portfolio Tracker helps you make smarter decisions about when to sell and how to manage your tax liability.