In U.S. investing, the tax on profit from selling an asset for more than its purchase price is called capital gains tax.
A capital gain generally arises when a capital asset is sold for more than its adjusted basis. The basis is often related to the purchase cost, but adjustments can matter. The gain is usually recognized when the asset is sold, not merely because its market price has risen while the owner still holds it.
U.S. tax rules distinguish short-term and long-term capital gains. For many assets, a holding period of one year or less produces short-term treatment, while a holding period of more than one year produces long-term treatment. Rates and detailed rules depend on the taxpayer’s income, asset, basis, and circumstances.
A capital loss occurs when an asset is sold for less than its basis. Capital gains tax is not the same as tax on wages, and an unrealized increase in value is not generally the same as a realized gain.