Capital Gain (Short-Term vs. Long-Term)
Profit on a sale, taxed by how long you held it.
What is Capital Gain (Short-Term vs. Long-Term)?
Held one year or less, the gain is short-term and taxed at ordinary income rates. Held more than one year, it is long-term and taxed at preferential rates (0%, 15%, or 20%). The one-year line is the single highest-leverage tax fact in retail investing.
Capital Gain (Short-Term vs. Long-Term): a worked example
A $10,000 gain costs $3,700 at a 37% ordinary rate, or $1,500 at 15% - a $2,200 difference from holding one extra day.
More terms in Taxes & Account Types
Cost Basis
What you paid, used to compute gain or loss on sale.
Wash Sale Rule
A loss is disallowed if you rebuy the same security within 30 days.
Tax-Loss Harvesting
Realizing losses to offset gains and up to $3,000 of ordinary income.
Qualified Dividend
A dividend taxed at long-term capital gains rates.
Traditional IRA / 401(k)
Deduct now, grow tax-deferred, pay ordinary income tax on withdrawal.
Roth IRA / Roth 401(k)
Pay tax now, grow tax-free, qualified withdrawals are untaxed.
Required Minimum Distribution (RMD)
Mandatory annual withdrawals from tax-deferred accounts starting at 73.
Step-Up in Basis
Inherited assets reset to market value at the date of death.