If an investment is held for more than 12 months, the capital gain is considered what?

When an investment is held for more than 12 months, the capital gain is classified as a long-term capital gain. This type of gain is advantageous because it is taxed at lower rates compared to ordinary income and short-term capital gains, which are typically taxed as regular income at your marginal tax rate.

Long-term capital gains rates generally range from 0% to 20%, depending on your income level, while ordinary income is taxed at higher rates that can go up to 37% in the highest tax brackets. This tax treatment encourages investors to hold their investments for longer periods, promoting stability in the financial markets.

Consequently, the correct answer emphasizes that long-term capital gains not only benefit from a favorable tax rate but are also distinct from other categories of income, thus making the classification crucial for tax planning and investment strategies.