Capital Gain

Pretty simple… a increase in the value of your capital invested. For example, you buy a house for $400,000, and 4 years later is is valued at $500,000. You have made a $100,000 (or 25%) capital gain.

Capital gains ignores all income (such as rent or dividends), and expenses that relate to that income (such as repairs & maintenance). These items are accounted for yearly in tax returns. Capital gains are not accounted for until they are ‘crystalised’ when an asset is sold for a profit. Until such time as an asset is sold, an increase in its value may be referred to as ‘paper gains’.

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