Capital gain/loss is generated by buying and selling investment property.
Capital gain is split into two categories.
Long Term Capital Gain: If the property is held for more than one year, it is considered long term. At this point long term capital gain is taxed at a maximum of 20%.
Short Term Capital Gain: If the property is held for one year or less, it is considered short term. Short term capital gain is taxed at the taxpayer’s normal tax rate.
Capital loss is categorized as either long term or short term and is generally deductible up to $3000 per year against other types of income. Any amount over $3000 is carried forward and deducted at $3000 per year, until it is completely deducted or offset by capital gains.