What it is
The capital gains rate is the tax rate applied to the profit an investor makes from selling an investment or asset for more than its purchase price. These gains are typically categorized as short-term (assets held for one year or less) or long-term (assets held for more than one year), with different tax rates often applied to each. Long-term capital gains rates are generally lower than ordinary income tax rates.
Debates over the capital gains rate frequently arise in discussions about tax policy and economic fairness. Policy changes to this rate can influence investor behavior, such as decisions to hold or sell assets, and can impact market liquidity and investment strategies. Retail investors need to understand their applicable capital gains rate to calculate after-tax returns on their investment sales.
Why it matters
This rate directly impacts your after-tax returns on investments, influencing how much profit you keep from selling assets.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice