US Tax Filing and Compliance

A Comprehensive Guide to Short Term vs. Long Term Capital Gains Taxes

By Sanskriti Saxena |Last Updated: December 29, 2025

A Comprehensive Guide to Short Term vs. Long Term Capital Gains Taxes

If you sell an asset for more than its original purchase price, the result is capital gain. However, there are two types of capital gains, based on how long you hold the capital asset. There is a huge difference between short vs long-term capital gains and how they are taxed.

In this blog, we will learn about the difference between short vs long-term capital gains. Also, discuss their impact on your taxes so you can reduce your tax liability.

Sanskriti Saxena(Tax Expert)

Miss Sanskriti is a certified Tax Expert. She has her expertise in US GAAP, Taxation, SOX, IRS, Accounting, and Auditing standards. Miss Saxena is an intellectual blend of a high-end auditor, tax consultant, and accountant

Frequently Asked Questions

The tax rate depends on whether the gain is long-term or short-term. Short-term gains are taxed at normal income tax rates, while long-term gains have preferential rates. It includes 0%, 15%, or 20% in the U.S., based on your income level.

The key difference between short-term and long-term capital gains is:

Short-term capital gain: Profits acquired from selling an asset that was held for less than 12 months. It is taxed at the regular income tax rates.
Long-term capital gain: Profit acquired from assets that were held for more than 12 months. It is taxed at lower rates.

To calculate Capital Gains, Use the Formula: Capital Gains Tax = Selling Price - Purchase Price - Any Allowable Expenses. The Result You Derive Will Then Be Taxed Depending on Whether It is Short-term or Long-term.

Yes, if You Sell an Asset at a Profit, Capital Gain Tax May Be Applicable. However, if You Sell the Asset at a Loss, You Can Use This Loss to Offset Gains or Deduct It Against Income (Up to a Certain Limit).

Capital Gains Tax Generally Applies to Stocks, Bonds, Mutual Funds, Real Estate, and Other Investment Property. Assests for Personal-use May Also Qualify.

A Comprehensive Guide to Short Term vs. Long Term Capital Gains Taxes

Frequently Asked Questions

What is the Capital Gains Tax Rate?

What is the Difference Between Short-term and Long-term Capital Gains?

How Do You Calculate Capital Gains?

Are Capital Gains Taxed Every Time You Sell an Asset?

What Assets Are Subject to Capital Gains Tax?

A Comprehensive Guide to Short Term vs. Long Term Capital Gains Taxes

Frequently Asked Questions

What is the Capital Gains Tax Rate?

What is the Difference Between Short-term and Long-term Capital Gains?

How Do You Calculate Capital Gains?

Are Capital Gains Taxed Every Time You Sell an Asset?

What Assets Are Subject to Capital Gains Tax?