From the course: Build Your Financial Literacy
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Capital gains and capital losses
From the course: Build Your Financial Literacy
Capital gains and capital losses
- Capital gains and capital loss; They are critical investment terms that play an important role in how you are taxed. Let's take a quick dive in to better understand how these two concepts play into your investments. A capital gain occurs when a security, that is a stock, fund, house, et cetera, is sold for a price higher than the price that you paid for it. For example, if you buy a house for $350,000 and sell the house five years later, for $450,000, you will have realized a capital gain of $100,000. In other words, you have made a profit of $100,000. Conversely, a capital loss occurs when a security is sold for a price lower than the original purchase price. So for example, you buy a house for $350,000 and sell the house five years later for $300,000. You will have realized a capital loss of $50,000. That is to say, you will have lost $50,000. When it comes to filing your tax returns, it is important to note that…
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