Capital Gains Tax
About Capital Gains Tax
Capital Gains Tax (CGT) is a tax levied on the profit or gain made from the sale or disposal of certain assets. These assets can include stocks, bonds, real estate, businesses, and other investments. The tax is applied to the difference between the purchase price (or the cost basis) of the asset and the selling price when the asset is sold or otherwise disposed of.
Key Points about Capital Gains Tax:
Short-term vs. Long-term Gains:
Short-term capital gains
are usually taxed at ordinary income tax rates and apply to assets held for one year or less.Long-term capital gains
are typically taxed at a lower rate and apply to assets held for more than one year.
Exemptions and Deductions:
- Certain assets may be exempt from capital gains tax, such as a primary residence (up to a certain limit).
- In some countries, there are allowances or thresholds below which capital gains are not taxed.
Rates:
- The rates vary depending on the jurisdiction, the type of asset, the income of the individual or entity, and the duration the asset was held.
Offsetting Losses:
- Capital losses from the sale of assets can often be used to offset capital gains, reducing the total amount of tax owed.
Special Rules and Exemptions:
- There may be special rules for certain types of assets, like collectibles, or for specific circumstances, such as inheritance or gifts.