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Save taxes by knowing the difference between short- and long-term capital gainsMar 02 '01 Write an essay on this topic.The Bottom Line Short-term capital gains are "profits" from assets held a year or less. They are taxed at a higher rate than assets held more than one year. Short-term capital gains or losses are capital gains or losses on assets you dispose of (sell) one year or less from the time you acquire them. Careful attention to the holding period for an asset is important because the tax rates on short-term capital gains are the same as the rates on ordinary income, while the taxes on long-term capital gains are limited to 10% for those in the 15% tax bracket and 20% for those in the 28% or higher tax brackets. Over the next few years, a super-long-term holding period with even lower tax rates is scheduled to kick in. Be careful with the holding period. The first day after you purchase an asset is the first day of the holding period. The 365th day after you purchase is the last day of the short-term holding period. Therefore, to qualify for the long-term holding period, you must sell the asset no earlier than the 366th day after you bought it. (I'll leave it to you to figure out the effect of leap years.)  |
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