Most of us don’t think much about taxes until it’s time to file — and then we suddenly remember that some financial moves can come with a tax surprise. One of the most common examples? Capital gains.

A capital gain happens when you sell an asset for more than you paid for it. The IRS considers that a form of income, and depending on what you sold — and how long you held it — taxes may apply.

Here are the most common situations where everyday people (not just investors on Wall Street) might encounter capital gains.

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1️⃣ Selling Real Estate

If you sell your home and make a profit, that profit is a capital gain. The good news: many homeowners qualify for an exclusion of up to:

• $250,000 for single filers

• $500,000 for married couples filing jointly

To qualify, you typically must have lived in the home as your primary residence for at least two out of the last five years.

For rental or investment properties, gains are generally fully taxable, and any depreciation claimed during ownership must be recaptured — often at higher tax rates.

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2️⃣ Selling Stocks, Bonds, and Mutual Funds

This is one of the most common ways people incur capital gains today. It might include:

• Individual stocks you’ve held for years

• Mutual funds or ETFs in a brokerage account

• Treasury or corporate bonds sold before maturity

Even if you reinvest dividends and never withdraw a dime, the act of selling for more than your cost basis creates a taxable gain.

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3️⃣ Mutual Fund Capital Gains Distributions

Here’s a sneaky one!

Even if you don’t sell anything, your mutual fund manager might — inside the fund — creating a gain that’s passed on to shareholders.

So you could owe taxes even if you saw no cash in your account.
This tends to happen more in active funds than in index funds.

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4️⃣ Selling a Business or Partnership Interest

Whether it’s a family-owned shop or a decades-long side hustle, selling a business can produce significant capital gains. These types of sales often involve a mix of:

• Capital gains (e.g., goodwill)

• Ordinary income (e.g., inventory or equipment)

Good advice and careful structuring really pay off here.

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5️⃣ Cryptocurrency Sales or Trades

Crypto isn’t just a buzzword — for tax purposes, the IRS treats it like property. Any of these can trigger capital gains:

• Selling Bitcoin or other coins for cash

• Trading one crypto for another

• Paying for goods or services with crypto

If the value went up since you acquired it, the difference may be taxable.

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6️⃣ Selling Personal Items or Collectibles

Did you sell artwork, jewelry, a classic car, or collectible coins? If you sold for more than you paid, that gain is taxable.

Important: Losses on personal-use property generally cannot be deducted.

Also, collectibles have special rules — gains may be taxed at a maximum rate of 28%, higher than normal long-term capital gains rates.

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How Are Capital Gains Taxed?

It depends on how long you held the asset:

Planning the timing of a sale can make a meaningful difference.

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Why This Matters for Federal Employees

Many federal workers build significant wealth in:

• TSP accounts

• Brokerage investments

• Real estate as they prepare to relocate or downsize

• Employee stock or inherited property

When retirement decisions collide with capital gains, tax planning becomes essential. A well-timed move could save thousands — money that can stay working for you in retirement.

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Final Thoughts

Capital gains aren’t bad — in fact, they’re usually a sign of financial progress.
But understanding when they occur (and how they’re taxed) can help you avoid surprises and keep more of your hard-earned money.

If you’re preparing for retirement or considering a major sale, this is a great area to get advice tailored to your situation.