Capital gains occur when you sell a stock or ETF for more than you paid for it. Capital gains trigger tax consequences. If the stock or ETF was owned for less than 1 year, it is considered a short-term capital gain. If the stock or ETF was owned for more than 1 year, it is considered a long-term capital gain.
Alternatively, capital losses occur when you sell a stock or ETF for less than you paid for it. They also have an impact on your taxes. Capital losses can be used as deductions on your tax return and make it possible for you to recoup at least part of their losses on your tax return by offsetting capital gains and other forms of income.
Note: This article is not intended to serve as tax or legal advice. We encourage you to consult with your legal and/or tax advisors for advice specific to your individual legal and/or tax situation.
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