What does capital gains tax mean?

Capital gains tax is a tax that is imposed on the profit or gain from the sale of a capital asset. A capital asset is any property, investment, or item not considered a current asset, such as cash or inventory. An equity grant is considered a capital asset.

When you sell a capital asset for more than you paid, the difference between the sale price and the purchase price is considered a capital gain

If the sale price is less than the purchase price, the difference is considered a capital loss.

The capital gains tax is only imposed on the portion of the gain that exceeds a certain threshold, called a capital gains tax rate. The rate will vary based on the type of asset and the holding period. 

Long-term capital gains (assets held for more than one year) are typically taxed at a lower rate than short-term capital gains (assets held for less than one year). The capital gains tax rate is also subject to change by the government, and it may vary based on the income level of the taxpayer, with higher-income individuals paying a higher rate than those with lower income.

It's important to note that capital gains tax rules and regulations may vary by country or jurisdiction, so it is advisable to consult with a tax advisor or a financial professional for specific information about your country or state's capital gains tax laws.

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