# Capital Gains Tax

*Taxes — Finicade finance glossary*

Capital gains tax is charged on the profit from selling an asset, not on its value while you hold it. That timing feature is the most valuable thing in investing: an unsold gain compounds untaxed, and holding on defers the bill indefinitely. Rates are typically lower than income tax rates for assets held beyond a year, which is a deliberate policy choice to reward long-term holding — and a long-standing fairness argument.

**Also known as:** CGT, tax on capital gains

**Related terms:** [Capital Gain](https://finicade.com/glossary/capital-gain), [Long-Term vs Short-Term Capital Gains](https://finicade.com/glossary/long-term-vs-short-term-capital-gains), [Cost Basis](https://finicade.com/glossary/cost-basis), [Tax-Loss Harvesting](https://finicade.com/glossary/tax-loss-harvesting), [Step-Up in Basis](https://finicade.com/glossary/step-up-in-basis)

Source: https://finicade.com/glossary/capital-gains-tax