what is a long term capital gain or loss 
a long term capital gain or loss for tax purposes is the gain or loss stemming from the sale of an investment that was held for longer than 12 months before it was sold investments that are held for less than 12 months are reported as short term capital gains or losses long term capital gains generally get more favorable tax treatment than short term gains capital losses short or long get the same tax treatment understanding long term capital gain or lossthe gain or loss in an investment is the difference in value between the sale price and the purchase price this number is either the net profit or loss the investor experienced when selling the asset the internal revenue service irs distinguishes between long term and short term capital gains and taxes them differently long term gains are taxed at 0 to 20 depending on the taxpayer s income tax bracket short term gains are taxed as ordinary income which is a higher percentage for most taxpayers capital losses short term or long term are treated the same taxpayers report their capital gains and losses for the year when they file their tax returns gains and losses are recorded on schedule d 1you can deduct a significant capital loss over a period of years the annual limit is a deduction of 3 000 this is called carrying forward a loss 2example of long term capital gains and lossesimagine melanie grant is filing her taxes and she has a long term capital gain from the sale of her shares of stock for technet limited melanie purchased these shares a few years ago during the initial offering period for 175 000 and sold them this year for 220 000 she has a long term capital gain of 45 000 which will be taxed at the capital gains tax rate the sale of your primary home is taxed differently even if you made gains on the sale if you meet the eligibility requirements you can exclude up to 500 000 of the home s sale from gains 3now assume she is also selling the vacation home she purchased less than one year ago for 80 000 she has not owned the property for very long so she has not gathered much equity in it when she sells it only a few months later she receives 82 000 this presents her with a short term capital gain of 2 000 unlike the sale of her long held shares of stock this profit will be taxed as income adding 2 000 to her annual income calculation if melanie had instead sold her vacation home for 78 000 experiencing a short term loss she could have used that 2 000 to offset some of her tax liability for the 45 000 long term capital gains she had experienced can you deduct a long term capital loss the internal revenue service lets you deduct and carry over to the next tax year any capital losses you can only claim the lessor of 3 000 1 500 if you re married filing separately or your total net loss in a given year you can do that in every subsequent year until the loss is fully accounted for 1