Many of you might confuse what is the meaning of Capital Gains and Losses. A capital gain can be described in two ways; it is by making payment for your investment and what you can receive by selling the investment. If you have made profits on that investment, you can call it a capital gain. In case you lost your money on that investment, then you can call it a capital loss.

The profits you can earn by means of buying or selling any capital assets are called capital gains. Example of capitals assets are stocks, any mutual funds or bonds, property like real estate, any kinds of precious metals and coins, fine art, and different kinds of collectibles. Unlike wages, any interest and dividends are only considered as ordinary income and not a capital gains income.

Several people are using tax deferred retirement account to invest in stocks, bonds, and other mutual funds. Here are the examples of tax deferred retirement accounts Individual Retirement Accounts (IRA), Roth IRA and 401(k) plans. In this accounts, your investment profits are not considered as capital gains. This income can be taxed as ordinary income and called as tax deferred as long as the money is withdrawn.
   
As an investor, you should keep and track all the records of your investment. These records are essential for you to calculate the amounts of capital gains you have. To make it simple you can write down all the information like what stocks you bought; how much money you invested, fees or commissions of your brokerage, and the time (when) you bought that investment. It is also important to remember when you sold your investment, the certain amount, fees and any commissions you’ve paid just to sell that investment.