What is the difference between short-term and long-term capital gains tax in the US?

Short-term capital gains (assets held ≤ 1 year) are taxed as ordinary income at your marginal rate (up to 37%). Long-term capital gains (held > 1 year) are taxed at preferential rates: 0% for lower incomes, 15% for most, or 20% for high earners. This difference can be substantial.

When does the holding period start for capital gains purposes?

The holding period begins the day after you purchase the asset and ends on the day you sell it. To qualify for long-term rates, you must hold for more than 12 months. Selling on the exact 1-year anniversary still counts as short-term.

Does the Net Investment Income Tax (NIIT) apply?

An additional 3.8% NIIT applies to net investment income for single filers with modified AGI above $200,000 (or $250,000 for married filing jointly). This can raise the effective long-term rate to 23.8% for high earners.

⚖️Long vs Short-Term Stock Tax Calculator

See exactly how much tax you save by holding a stock for over one year before selling.

Capital Gain ($)

Short-Term Tax Rate (Ordinary Income)

Long-Term Capital Gains Rate

Short-Term vs Long-Term Capital Gains: US Tax Rules

The US tax code rewards long-term investors. Selling a stock held for more than one year qualifies for long-term capital gains rates (0%, 15%, or 20%) — significantly lower than ordinary income tax rates (up to 37%) that apply to short-term gains.

Tax Rate Comparison

Holding Period	Tax Rate	2026 Income Threshold (Single)
≤ 1 year (short)	Ordinary income (10–37%)	All incomes
> 1 year (long)	0%	≤ ~$48,350
> 1 year (long)	15%	$48,350 – $533,400
> 1 year (long)	20%	> $533,400

Key Strategy: Tax-Loss Harvesting

You can offset capital gains with capital losses. If you have losing positions, consider selling them to reduce taxable gains — but be aware of the "wash sale" rule that disallows losses if you buy the same or substantially identical security within 30 days before or after the sale.

FAQ

Do state taxes apply in addition to federal?

Yes — most states tax capital gains as ordinary income at rates ranging from 0% (no income tax states like Florida and Texas) to over 13% (California). This calculator shows federal tax only.

Are dividends taxed differently?

Qualified dividends are taxed at long-term capital gains rates. Non-qualified (ordinary) dividends are taxed as ordinary income, regardless of how long you've held the stock.

※ Federal tax only. State taxes, AMT, and NIIT may apply. Consult a tax professional for your situation.

Short-Term vs Long-Term Capital Gains: US Tax Rules

Tax Rate Comparison

Key Strategy: Tax-Loss Harvesting

FAQ

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