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 Wisconsin, 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 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 normal 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 and are the same across all states, including Wisconsin. The state of Wisconsin also taxes capital gains, but the tax rate is determined by the state's income tax rates. Taxpayers in Wisconsin must report capital gains on both their federal and state income tax returns. It's important to note that there are certain exclusions and exemptions, such as the exclusion on the sale of a primary residence under specific conditions. An attorney or tax specialist can provide advice on specific situations and how to apply these rules to individual cases.