The short-term capital gains tax is what you pay when you sell an asset you held for one year or less at a profit, and the rate is your ordinary federal income tax rate. For 2026, that can reach 37% at the top bracket, plus a 3.8% surtax on higher earners and whatever your state charges. There is no preferential rate for short-term gains. That is the whole point of the one-year holding period: assets held longer get taxed at 0%, 15%, or 20%, and everything else gets taxed like a paycheck.
What Makes a Gain Short-Term
Your holding period starts the day after you buy an asset and includes the day you sell it. One year or less, and the profit is short-term. More than one year, and it is long-term.1Internal Revenue Service. Topic No. 409, Capital Gains and Losses
The day count is exact. Stock bought on June 1 must be held until at least June 2 of the following year to qualify as long-term. Sell on June 1 and you are still inside the one-year window, and the whole gain gets taxed at ordinary rates. For a high earner, that single day is the difference between a 20% rate and a 37% rate on the same dollars.
The rule covers most capital assets: stocks, bonds, mutual funds, real estate, and collectibles. Inherited assets work differently and are covered below.
The 2026 Ordinary Income Rates That Apply
A short-term gain gets added to the rest of your income and taxed at whatever marginal rate you land in. For 2026, the federal brackets for single filers are:2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10% up to $12,400
- 12% from $12,400 to $50,400
- 22% from $50,400 to $105,700
- 24% from $105,700 to $201,775
- 32% from $201,775 to $256,225
- 35% from $256,225 to $640,600
- 37% above $640,600
For married couples filing jointly, the 37% rate starts above $768,700.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
A gain that pushes you into a higher bracket does not raise the rate on all your income. Only the dollars above each threshold get the higher rate. If a $10,000 short-term gain straddles the line between the 24% and 32% brackets, part is taxed at 24% and the rest at 32%.
How Much More Short-Term Costs Than Long-Term
Long-term capital gains use a separate schedule of 0%, 15%, or 20%. For 2026, single filers pay 0% on long-term gains when taxable income stays under $49,450, 15% up to $545,500, and 20% above that. For married couples filing jointly, the 15% rate runs from $98,900 to $613,700, with 20% above.3Tax Foundation. 2026 Tax Brackets and Federal Income Tax Rates
Take a single filer earning $300,000 in salary who realizes a $10,000 gain. Sold short-term, the gain is taxed at that person’s 35% marginal rate, or $3,500. Held past the one-year mark, the same gain would face the 15% long-term rate, or $1,500. The $2,000 gap is the pure cost of selling early.
Collectibles follow a separate rule. Long-term gains on art, coins, and antiques are taxed at a maximum of 28%, not 20%. Short-term gains on collectibles are still taxed at ordinary income rates.1Internal Revenue Service. Topic No. 409, Capital Gains and Losses
The 3.8% Net Investment Income Tax
Higher earners owe an additional 3.8% surtax on net investment income, and short-term capital gains count. The surtax applies once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married couples filing jointly.4Internal Revenue Service. Questions and Answers on the Net Investment Income Tax These thresholds are not indexed for inflation, so more households cross them each year.
The 3.8% is applied to the smaller of your net investment income or the amount your modified adjusted gross income exceeds the threshold.5Internal Revenue Service. Topic No. 559, Net Investment Income Tax A single filer with $250,000 total income including a $30,000 short-term gain would owe the surtax on $30,000, adding $1,140 on top of the ordinary rate.
At the top, a short-term gain can face 37% plus 3.8%, or 40.8% in federal tax before any state charge.
How to Calculate the Gain
The gain equals what you received minus your adjusted basis. Basis is what you paid, including purchase commissions or transaction fees. The amount realized is the sale price minus selling costs.
Buy 100 shares at $50 and pay a $10 commission, and your basis is $5,010. Sell six months later at $60 per share, paying another $10 in fees, and you net $5,990. The short-term gain is $980.
For real estate or business property, basis moves over time. Capital improvements raise it, and depreciation lowers it. A rental bought for $200,000 with a $15,000 roof added and $30,000 in depreciation claimed has an adjusted basis of $185,000.
Inherited Assets Are a Boundary
If you inherit an asset, your basis is generally the fair market value on the date the original owner died, not the price they paid.6Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This stepped-up basis can eliminate most of what would otherwise be a gain. Stock a parent bought for $10,000 that was worth $100,000 at death gets a $100,000 basis in your hands. Sell it at $105,000 and only $5,000 is taxable. Gifts made during life work differently: you carry over the giver’s original basis with no step-up.7Internal Revenue Service. Gifts and Inheritances
Using Losses to Offset Gains
Before you owe anything, the IRS makes you net all gains and losses from the year in a set order. Short-term gains are first offset against short-term losses. Long-term gains are offset against long-term losses. If one category ends net positive and the other net negative, they offset each other.1Internal Revenue Service. Topic No. 409, Capital Gains and Losses
This ordering matters. A short-term loss ideally offsets a short-term gain, which is taxed at the higher ordinary rate. Using it against a long-term gain effectively wastes the deduction against income that would have been taxed at 15% or 20% anyway.
If total losses exceed total gains, you can deduct up to $3,000 of the excess against ordinary income each year, or $1,500 if married filing separately. Anything left carries forward indefinitely and keeps its short-term or long-term character.1Internal Revenue Service. Topic No. 409, Capital Gains and Losses A $20,000 net loss takes over six years to work off at $3,000 a year with no future gains to absorb it.
The Wash Sale Rule
Sell a security at a loss and buy a substantially identical one within 30 days before or after, and the IRS disallows the loss. The window is 61 days total: 30 before, the sale date, and 30 after.8Internal Revenue Service. Publication 550, Investment Income and Expenses
The disallowed loss usually is not gone. It gets added to the basis of the replacement shares, deferring the deduction until you sell those. The holding period of the original shares also tacks on to the new ones.
The exception catches people. If your spouse or a corporation you control makes the replacement purchase, or if you buy the replacement inside an IRA or Roth IRA, the rule still applies. In the retirement account version, the disallowed loss cannot be added to any basis and is lost entirely.
State Tax on Top
Most states tax capital gains as ordinary income, with top state rates ranging from around 2.5% to over 13%. Eight states have no individual income tax. Combined with the federal rate and the 3.8% surtax, a short-term gain for a high earner in a high-tax state can face an effective rate above 50%.
Futures and Broad-Based Index Options Are Different
One boundary worth flagging. Under Section 1256, regulated futures contracts, broad-based index options, and certain foreign currency contracts are automatically taxed as 60% long-term and 40% short-term regardless of how long you held them.9Office of the Law Revision Counsel. 26 USC 1256 – Section 1256 Contracts Marked to Market The blended treatment produces a top effective rate of roughly 26.8%, well below the 37% short-term ceiling. Individual stock options and single-stock futures do not qualify.
Reporting and Paying
Every transaction goes on Form 8949, with purchase date, sale date, proceeds, and cost basis. Short-term and long-term sales are listed in separate sections.10Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets Totals flow to Schedule D, where the netting happens and the final gain or loss lands on your return.11Internal Revenue Service. Instructions for Form 8949 Your brokerage sends a Form 1099-B reporting proceeds and, for covered securities, cost basis, and your Form 8949 figures need to reconcile with what the brokerage reported.12Internal Revenue Service. About Form 1099-B, Proceeds From Broker and Barter Exchange Transactions
A large short-term gain mid-year can create an estimated tax obligation. If you owe $1,000 or more at filing, an underpayment penalty is possible unless you meet a safe harbor: paying at least 90% of the current year’s tax, or 100% of last year’s tax, or 110% if your prior-year adjusted gross income was above $150,000.13Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty If a gain lands late in the year and earlier quarters were quiet, the annualized income installment method on Form 2210 can show the IRS that no estimated payment was due earlier.