What is a Short-term capital gain?
A short-term capital gain is profit realized from selling capital assets held for one year or less, taxed at ordinary income rates ranging from 10% to 37% depending on the taxpayer's income bracket. This classification differs significantly from long-term capital gains, which are treated preferentially for assets held for more than one year. The holding period begins on the day after acquisition and ends on the sale date, with the exact timing critical to determining tax treatment. Short-term gains commonly result from stock trading, cryptocurrency sales, or quick property flips. These gains offset short-term capital losses first, before being netted against long-term gains. Tax loss harvesting strategies prioritize harvesting short-term losses to offset short-term gains because the tax rate differential yields greater immediate savings than offsetting long-term gains taxed at lower preferential rates.
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