Short-Term Capital Gains
Profits from selling assets held for one year or less, taxed at ordinary income rates.
What is Short-Term Capital Gains?
Short-term capital gains (STCG) are profits from selling assets that were held for one year or less. Unlike long-term capital gains, short-term gains receive no preferential tax treatment — they are taxed at the taxpayer's ordinary income rate (up to 37% federally). This makes the one-year holding period threshold a critical tax planning boundary: selling just one day too soon can substantially increase the tax cost of a gain. Short-term gains are common among active traders, day traders, and investors who sell positions within the year. Losses from short-term positions can offset short-term gains dollar-for-dollar and can also offset long-term gains.
Example
An investor in the 32% tax bracket sells a stock at a $10,000 profit after holding it 10 months (short-term). They owe $3,200 in tax. Had they held just two more months (making it long-term), the tax would have been $1,500 (15% LTCG rate) — a savings of $1,700 simply for waiting.