What is Capital Gains Tax (CGT)?

CGT is a tax on the profit you make when you sell an asset (e.g., stocks, property) for more than its original purchase price. The tax applies only to the 'gain,' not the total sale amount.

How is capital gains tax typically calculated?

It's generally calculated as the difference between the asset's sale price and its original cost (cost basis), minus any eligible selling expenses. This net profit is then taxed at the applicable CGT rate.

What's the difference between short-term and long-term capital gains?

Short-term capital gains are from assets held for one year or less and are usually taxed at ordinary income rates. Long-term capital gains are from assets held for over a year, often qualifying for lower, preferential tax rates.

Can capital gains tax be reduced or avoided?

Yes, strategies include tax-loss harvesting, holding assets for longer to qualify for long-term rates, utilizing tax-advantaged accounts, or taking advantage of specific exemptions like those for primary residences in certain regions.