Short-Term Capital Gains

If the date of the sale is one year or less after the date of the purchase, you have a short-term capital gain.

Example:
You bought 100 shares of ABC on May 12, 2009.
You sold the same 100 shares of ABC on May 18, 2009.
This sale results in a Short-Term gain as the holding period was less than 366 days.

Short-term capital gains are taxed at the same rate as ordinary income (like wages and interest income). Remember, it is net gains that are taxed, therefore any losses will offset the gains for the same period. If you are in the highest federal tax bracket and you pay state capital gains tax, it's possible to owe more than 40% of your investment gain in short-term capital gains taxes.

Long-term capital gains on the other hand, are taxed at much lower rates, thus it is important to accurately calculate the holding period for your investments.

Learn More... Long-Term Capital Gains

^{Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Armen Computing Ltd. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.}

• Capital Gains
• Calculating Capital Gains
• Benefits to Active Traders
• Types of Capital Gains
• Short-Term Capital Gains
• Long-Term Capital Gains
• Short Sales
• Wash Sales
• IRS Schedule D
• Mark to Market
• Which Form to File?
• Brokerage Reporting
• Common Misconceptions
• Options
• Futures
• Mutual Funds
• Dividends