Short-term vs long-term capital gains explained

Key takeaways

• The clock starts the day after you buy. Use the trade date, not the settlement date.
• A sale on the anniversary is still short-term. The next day is long-term.
• Short-term gains use ordinary rates, from 10% to 37%.
• Long-term gains use 0%, 15%, or 20%.
• One extra day saves $3,677.50 for a single filer with $30,000 of other taxable income on a $40,000 gain.

Before you start

Capital gain

A capital gain is the profit from selling a capital asset for more than your basis.

Cost basis

Cost basis is what you paid for the asset, plus purchase fees.

Holding period

The holding period runs from the day after you buy to the day you sell.

The 1-year line

The 1-year line is the anniversary of the purchase date. A sale that day is still short-term.

What is a capital gain?

A capital asset is property you own for investment or personal use, such as stocks, crypto, or a home you live in, and inventory you hold for sale to customers is not a capital asset.

You owe tax when you sell, and you do not owe capital-gains tax while you still hold the asset, so a gain that exists only on paper is unrealized and it is not taxed yet.

Subtract your basis from the sale price to get the gain, since fees you paid to buy the asset raise your basis and fees you paid to sell it lower the amount you report as proceeds.

What is the 1-year line?

Count the holding period from the day after you buy, because the trade date sets that start and the settlement date does not.

Buy on 10 March 2025, and a sale on 10 March 2026 is the anniversary, so it is still short-term, while a sale on 11 March 2026 is the first long-term day.

A buy on 29 February 2024 does not use a flat 365-day count, and this calculator moves the anniversary to 1 March 2025 because 2025 has no 29 February, so a sale on 1 March 2025 is still short-term and 2 March 2025 is long-term.

A buy on 31 January that you sell on 28 February of the same year is still short-term, and the anniversary is 31 January of the next year, which is also short-term, while the next day is long-term.

How is a short-term gain taxed?

A short-term gain is taxed as ordinary income, and for 2026 the ordinary federal rates run from 10% to 37%, depending on your taxable income before the gain plus the gain itself.

The gain stacks on top of that income and fills the rest of your current bracket, then the next brackets, and this page does not print the full ordinary bracket table because the calculator applies the brackets when you enter your income.

How is a long-term gain taxed?

A long-term gain uses three federal rates in 2026, which are 0%, 15%, and 20%, and your other taxable income fills the 0% room first so the gain is taxed only on the room that is left.

For a single filer the 0% ceiling is $49,450, and for married filing jointly the 0% ceiling is $98,900, while the next slice is taxed at 15% and then at 20%. See the 2026 rate guide for the full ceilings.

What does one extra day save?

Each row below uses the same $40,000 gain, with the short-term sale on 10 March 2026 and the long-term sale on 11 March 2026, and state tax is left out because the income figure is taxable income before the gain.

Profile A is single with $30,000 of taxable income, profile B is married filing jointly with $90,000, and profile C is single with $250,000, so the table shows the federal tax on the gain and the net investment income tax (NIIT) for each sale date.

Which holding rules differ?

Restricted stock units follow a different clock, because the capital-gain clock for the shares starts at vest and income at vest is wages, not a capital gain, so read the RSU guide for the wage side, and note that this calculator does not start the clock at vest (Publication 525).

A wash sale changes basis and the holding period, because a disallowed loss is added to the basis of the replacement shares and the replacement shares keep the original holding period, so read the wash-sale guide for the 30-day window, and note that this calculator only flags the repurchase (Publication 550).

A capital-gain distribution on Form 1099-DIV is short-term or long-term based on the fund reporting, not on the day you bought the fund, which the Form 1099-DIV instructions explain.

Which forms report the sale?

Form 1099-B reports the dates and whether the sale is short-term or long-term when the broker knows, so check those boxes before you copy the dates into the calculator, as the Form 1099-B instructions describe.

Form 8949 splits the sales, with Part I for short-term sales and Part II for long-term sales, and Schedule D totals Part I and Part II, as the Form 8949 instructions and the Schedule D instructions describe.

A large sale requires estimated tax when withholding will not cover the bill, and this page does not compute the voucher, which Publication 505 covers.