What's the difference between a short-term and long-term capital gain?
Short-term gains come from the sale of property owned one year or less and are taxed at your maximum tax rate, as high as 37% in 2020.
Long-term gains come from the sale of property held more than one year and are taxed at either 0%, 15%, or 20% for 2020.
What is the holding period?
If you sold on April 15, you would have a short-term gain or loss.
A sale one day later on April 16 would produce long-term tax consequences, since you would have held the asset for more than one year.
How much do I have to pay?
Short-term profits are taxed at your maximum tax rate, just like your salary, up to 37% and could even be subject to the additional 3.8% Medicare surtax, depending on your income level.
Long-term gains are treated much better. Long-term gains are taxed at 15% or 20% except for taxpayers in the 10% or 15% bracket. For low-bracket taxpayers, the long-term capital gains rate is 0%. There are exceptions, of course, since this is tax law.
Long-term gains on collectibles—such as stamps, antiques and coins—are taxed at 28%, unless you're in the 10% or 15 % or 25% bracket, in which case the 10% or 15% rate or 25% rate applies
Gains on real estate that are attributable to depreciation—since depreciation deductions reduce your cost basis, they also increase your profit dollar for dollar—are taxed at 25%, unless you're in the 10% or 15% bracket.
Long-term gains from stock sales by children under age 19—under age 24 if they are students—may not qualify for the 0% rate because of the Kiddie Tax rules. (When these rules apply, the child’s gains may be taxed at the parents’ higher rates.)
What is a capital loss?
Can I deduct my capital losses?
If you have $2,000 of short-term loss and only $1,000 of short-term gain, the net $1,000 short-term loss can be deducted against your net long-term gain (assuming you have one).
If you have an overall net capital loss for the year, you can deduct up to $3,000 of that loss against other kinds of income, including your salary and interest income.
Any excess net capital loss can be carried over to subsequent years to be deducted against capital gains and against up to $3,000 of other kinds of income.
If you use married filing separate filing status, however, the annual net capital loss deduction limit is only $1,500.