Short-Term vs. Long-Term Capital Gains Rules
The IRS taxes capital gains based on how long you held the asset before selling:
- Short-Term Gains (Held ≤ 1 year): Taxed as ordinary income, matching your standard federal income tax brackets (10% to 37%).
- Long-Term Gains (Held > 1 year): Benefit from preferential rates of 0%, 15%, or 20% depending on taxable income.
Frequently Asked Questions
What is the Net Investment Income Tax (NIIT)?
The NIIT is an additional 3.8% tax on net investment income (including capital gains and dividends) for taxpayers with modified adjusted gross income exceeding $200,000 (single) or $250,000 (married filing jointly).