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 North Carolina, as in other states, capital gains tax applies to the profit made from selling an asset for more than its purchase price. Capital gains are considered income and are subject to federal taxation by the Internal Revenue Service (IRS). The federal tax rate on capital gains depends on the taxpayer's income level and the length of time the asset was held. Long-term capital 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. North Carolina does not have a separate capital gains tax; instead, capital gains are taxed as part of state income tax. The state conforms to federal definitions of capital gains but taxes them at the flat state income tax rate, which may differ from the graduated federal rates. It's important to consult with an attorney or tax specialist to understand the specific implications for any capital gains transactions.