Capital gains tax

Capital gains tax is a tax on profit realized when an asset is sold or otherwise disposed of for more than its cost basis. Rules vary by jurisdiction and asset type.

Capital gain: The profit realized when an asset is disposed of for more than its adjusted cost basis. The taxable amount begins with the difference between proceeds and basis.
Mark-to-market taxation: A tax method that recognizes changes in asset value periodically without requiring a sale. It contrasts with systems that generally wait for a taxable disposition.
Real estate capital gains tax: Capital gains tax applied to profit from disposing of real property. Home and investment-property sales often have distinctive exemptions and rules.
Tax-loss harvesting: The sale of investments at a loss to offset taxable gains or income, subject to applicable rules. Investors may realize losses strategically to reduce tax on gains.
Tax progressivity: A tax structure in which the rate rises as the taxable amount or income increases. Rate design shapes how capital gains contribute to progressivity.
Cost basis: The amount used to determine gain or loss when an asset is disposed of. Basis sets the starting point for measuring taxable profit.
Financial transaction tax: A tax imposed on specified financial transactions, often calculated from transaction value. It taxes transaction activity rather than profit alone.
Stock: A security representing an ownership share in a corporation. Selling shares above their basis commonly produces a taxable capital gain.
Tax deferral: The postponement of a tax liability to a later time. Delaying a taxable sale can postpone payment and preserve invested capital.
Tax incidence: The distribution of a tax’s economic burden among affected parties. The person legally liable may not bear the full economic cost.

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