When you sell a personal or business asset for more than what you paid for it, the result is usually considered a capital gain and is taxable. Capital assets held for more than one year are taxed at special rates that are lower than that for ordinary income.

This video is a highly oversimplified view of what capital gains are and how they are taxed.

2023 UPDATE:

Capital Gains Rates MAGI thresholds for 2023:
0%: less than $44,625 (S), $89,250 (MFJ, QSS), $59,750 (HOH)
15%: $44,626 $492,300 (S), $89,251 $553,850 (MFJ, QSS), $59,751 $523,050 (HOH)
20%: over $492,300 (S), $553,850 (MFJ, QSS), $523,050 (HOH)

To see how capital gains tax is calculated using the Qualified Dividends and Capital Gains Worksheet, click here:    • How is Capital Gains Tax Calculated?  

To learn more about calculating basis, click here:    • What is basis? And How is it Calculated?  

To learn more about capital losses and how they work, click here:    • Capital Losses and how they affect yo...  

Additional information and resources:

"Instructions for Form 1040 and 1040SR" (this includes the Qualified Dividends and Capital Gains Worksheet). https://www.irs.gov/pub/irspdf/i1040...

IRS Publication 550: "Investment Income and Expenses": https://www.irs.gov/pub/irspdf/p550.pdf

The Tax Geek on The Site Formerly Known as Twitter: @taxgeekusa

The Tax Geek on Reddit: www.reddit.com/r/askataxgeek

All images other than those the producer of this video has created were sourced from Wikimedia Commons from the following users:

NatGeo Lover
Linsenhejhej
Kevato
Aimootest
Storm Properties
Phil Whitehouse
High Contest
Sergio Valle Duarte
JM Winkworth Collection
Dowingsst
Bill Family Collection

Intro and background music: "Bluesy Vibes" Doug Maxwell YouTube Audio Library

DISCLAIMER: This video is for educational and informational purposes only. It is not intended to render tax advice for individual situations. If you have questions regarding your particular tax situation, please check out the resources below, or consult with a qualified tax professional.

The information in this video is based on tax law and IRS regulations in place when this video was published.