Over 700 finance terms, Shmooped to perfection.
Long term capital gain is a type of tax on investment gains. It happens when an investor holds a security for 1 year or longer and the tax rate is meaningfully less than its ugly step-sister, the short term capital gain. At the Federal level, the current Long term capital gain tax rate is 25% but this figure is likely to change when/ if Congress finally tackles the issue. There is usually an incremental tax at the State level on these gains. The goal of this system is to encourage investors to be more patient, to hold their investments longer, the broader gain being, in theory, a more stable stock market. See Short Term Capital Gain.