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.
A 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 net loss over $3000 is carried forward and deducted at $3000 per year until it is completely deducted or offset by capital gains.