A capital gain is any increase in value of an asset (such as stocks or real estate) that exceeds the purchase price. A capital gain is unrealized until the asset is sold. Once the asset is sold, any profit earned from the sale is considered a capital gain. Realized capital gains are taxable, and the tax rate of capital gains depends on many factors, such as the duration of asset ownership and the asset owner’s tax bracket. Capital gain taxes may be deferred or reduced depending on many factors, including the investment vehicle through which they were earned, and how the capital gains are used after they are realized.
For example, investors can defer paying capital gains taxes by investing through a retirement account, such as an IRA or an Opportunity Fund.