Short-Term Capital Gains
Profits from selling assets held for one year or less, taxed at ordinary income tax rates (10% to 37%). There is no preferential rate for short-term gains.
Short-term capital gains result from selling capital assets that you held for one year or less. The holding period starts the day after you acquire the asset and ends on the day you sell it. These gains are added to your ordinary income and taxed at your regular tax rates, which range from 10% to 37% in 2025.
Because short-term gains do not receive any preferential tax treatment, they can result in a significantly higher tax bill than long-term gains. For a taxpayer in the 32% bracket, a $10,000 short-term gain would cost $3,200 in federal tax, while the same gain held long-term might cost only $1,500 at the 15% long-term rate.
This tax difference is one reason many investors use a buy-and-hold strategy, waiting at least one year and one day before selling appreciated assets. Day traders and active investors with frequent short-term gains may benefit from strategies like tax-loss harvesting or holding positions in tax-advantaged retirement accounts.
Related Terms
Capital Gains
The profit from selling a capital asset (stocks, real estate, etc.) for more than its purchase price. Capital gains are classified as short-term or long-term based on holding period.
Long-Term Capital Gains
Profits from selling assets held for more than one year, taxed at preferential rates of 0%, 15%, or 20% depending on your taxable income.
Tax Bracket
A range of income taxed at a specific rate. The US uses a progressive system with seven brackets ranging from 10% to 37% for 2025.
Cost Basis
The original purchase price of an asset (plus adjustments like commissions and reinvested dividends), used to calculate capital gain or loss when you sell.
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