WEBVTT

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When you sell a
capital asset for more

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than its original
purchase price,

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the result is a capital gain.

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The tax that you'll
pay on the capital gain

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depends on how long you held
the asset before selling it.

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Capital assets include stocks,
bonds, precious metals,

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jewelry, and real estate.

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And essentially, tax
policy encourages

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you to hold assets subject
to capital gains for a year

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or more.

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Those are considered
long-term capital gains.

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And the tax rate
on most taxpayers

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who report long-term capital
gains is often 15% or lower.

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Comparatively,
short-term capital gains

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are derived from assets
held for less than one

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year they're taxed just like
your ordinary income, which

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can be much higher, compared
to long-term capital gains,

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depending on your tax bracket.

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Capital gains are calculated
based on your adjusted basis

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in an asset.

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That's the amount that you
paid to acquire the asset, less

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depreciation plus any
costs that you incurred

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during the sale of the asset and
the costs of any improvements

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that you made.

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And if an asset is
given to you as a gift,

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then you inherit
the donor's basis.

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In short, because long-term
capital gains are generally

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taxed at a more favorable rate
than short-term capital gains,

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you can minimize your
capital gains tax

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by holding assets
for a year or more.

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Consider consulting a
financial professional

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if you're having trouble
understanding how

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capital gains affect your
tax bracket and overall tax

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liability.

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