A capital gain is simply the profit you receive as a result of selling a capital asset. When there is sale of the asset after owning it for a short period of time, such sale results in short-term capital gain treatment. If sale of the asset takes place after holding onto it for a longer period, the sale of the asset receives the more favorable long-term capital gain treatment. Likewise, a loss from the sale of a capital asset can sometimes reduce tax liabilities.
It’s no secret that the housing market in many parts of California and the rest of the country has favored sellers. That means after sitting tight through the housing market crash, many people who sold their homes this year brought in a nice little profit.
Fall is here, which means it’s time to start thinking about year-end tax consequences, including capital gains taxes. Of course, you would never want to buy or sell investments based on tax outcomes alone, but it’s still a good idea to understand the tax consequences that you stand to face and plan accordingly.