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 Minnesota, capital gains tax is levied on the profit made from the sale of an asset, such as real estate, stocks, or personal property. This tax is not separate from income tax but is a component of it. The federal government, through the Internal Revenue Service (IRS), taxes capital gains at different rates depending on whether they are long-term or short-term gains. Long-term gains, from assets held for more than one year, are taxed at a lower rate than short-term gains, which are from assets held for less than a year. Minnesota follows the federal definition for capital gains but taxes them as part of the state income tax. The state does not have a separate capital gains tax rate; instead, capital gains are taxed at the same rates as other types of income, subject to Minnesota's income tax brackets. It's important for individuals to consult with an attorney or tax specialist to understand the specific implications for their personal tax situation.