Capital gains tax is a tax on income received from the sale of an asset—such as a business, real estate, your home, stocks, bonds, coin collections, and jewelry. Capital gains tax is paid on the financial gain between the amount you paid for (or invested to build) the asset, and the amount for which it is sold.

The rate (percentage) paid as capital gains tax has traditionally been lower than the rate (percentage) paid on income tax. And the Internal Revenue Service (IRS) has traditionally taxed long term gains differently than short term gains—with the distinction based on how long the taxpayer owned or held the asset.

In Indiana, as in other states, capital gains tax is levied on the profit made from the sale of certain assets such as real estate, stocks, and other investments. The tax is applied to the difference between the selling price and the original purchase price (basis) of the asset. Capital gains are classified as either short-term or long-term based on the holding period of the asset. Short-term capital gains, for assets held for one year or less, are taxed as ordinary income at the taxpayer's regular income tax rate. Long-term capital gains, for assets held for more than one year, are taxed at reduced rates, which are typically lower than the rates for ordinary income. These rates are set by federal law, as the state of Indiana does not impose a separate state-level capital gains tax. Instead, capital gains are included in the state income tax return and taxed at the flat state income tax rate. It's important to consult with an attorney or tax advisor to understand the specific implications for individual tax situations.