What is the difference between long term and short term capital gains?

Long-term capital gains are taxed at a different (and lower!) rate. Here is Investopedia’s description of long-term capital gains tax rate -- we really like their definition as it’s straight-forward and relatively jargon-free.

The IRS taxes long-term capital gains at a substantially reduced rate to encourage individuals and businesses to keep their investments. The difference between the long-term capital gains rate, generally referred to as simply the capital gains rate, and the ordinary income tax rate, which applies to short-term gains, can be almost as much as 20%.

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