Capital Gains Tax: Short-Term vs. Long-Term
When you sell an investment (like stocks, crypto, or real estate) for a profit, that profit is called a Capital Gain. The IRS taxes this differently depending on how long you held the asset.
Time Matters: The 1 Year Rule
- Short-Term (< 1 Year): Taxed as ordinary income. This means it is added to your salary and taxed at your regular bracket (up to 37%).
- Long-Term (> 1 Year): Taxed at preferential rates (0%, 15%, or 20%). This is much lower than income tax rates, rewarding long-term investors.
Strategies like tax-loss harvesting can help offset these gains. Use this calculator to estimate your potential liability before you sell.