A capital gain is the profit you realize when you sell an asset — stocks, a home, crypto — for more than its cost basis. Gains on assets held over a year are 'long-term' and taxed at preferential rates of 0%, 15%, or 20%; gains on assets held a year or less are 'short-term' and taxed as ordinary income.
Because long-term rates are much lower, holding an investment past the one-year mark can substantially cut the tax. Realized losses can offset gains to reduce the bill further.
Related terms: Dollar-Cost Averaging · Safe Withdrawal Rate