For how long do capital gains taxes apply to investments held over a year?

Investments held for over a year are subject to long-term capital gains tax, which typically applies a lower tax rate compared to short-term capital gains. Long-term capital gains are generally taxed at rates that are significantly more favorable, often 0%, 15%, or 20%, depending on the taxpayer's income level. This incentivizes longer investment horizons, as individuals who hold assets for more than a year benefit from reduced tax liabilities on their profits.

Short-term capital gains, on the other hand, pertain to assets sold within a year of purchase and are taxed at ordinary income tax rates, which can be considerably higher. Therefore, the distinction in tax treatment between short-term and long-term capital gains is crucial for investors to understand when planning their investment strategies and tax implications.