Unlock 2024-2025: Your Guide to Short-Term Capital Gains Tax Rates!
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Are you diving into the world of trading? If so, it’s vital to understand the tax implications that come with your profitable trades. The clock is ticking when it comes to investment ownership, as the duration you hold those assets significantly influences your tax rate on capital gains.
The IRS separates capital gains into two categories: short-term and long-term. The magic number here? One year. This pivotal milestone determines whether you’ll benefit from preferential tax rates or be taxed at ordinary income levels.
Short-term capital gains come into play when you sell an investment for a profit after holding it for one year or less.
Understanding Short-Term Capital Gains Taxes
When you sell assets for more than what you paid, that profit counts as a capital gain. But here’s the catch: short-term capital gains face steeper tax rates compared to long-term gains. Your ownership duration is the key factor that sets these two apart.
Short-term capital gains are realized the moment you sell an investment at a profit within a year of purchase. On the flip side, if you sell at a loss, you’ll incur a capital loss, which means no tax payment is needed.
Net short-term capital gains—the difference between your profits and losses—are taxed at the income tax rate linked to your taxable income and filing status. For 2024 and 2025, short-term capital gains are classified as ordinary income, with tax rates ranging from 10% to 37%.
Because short-term gains are treated as regular income, they could push you into a higher tax bracket if you’ve had a particularly successful trading year. This is especially crucial for anyone actively trading in taxable brokerage accounts, which includes stocks, bonds, cryptocurrencies, ETFs, options, and futures.
Short-Term Capital Gains Tax Rates for 2024
If you realize a net short-term capital gain in 2024, it will be taxed based on the following income tax rates, depending on your filing status:
2024 Tax Brackets (for returns filed in 2025)
| Tax Rate | Single | Head of Household | Married Filing Jointly or Qualifying Widow | Married Filing Separately |
| 10% | $0 to $11,600 | $0 to $16,550 | $0 to $23,200 | $0 to $11,600 |
| 12% | $11,601 to $47,150 | $16,551 to $63,100 | $23,201 to $94,300 | $11,601 to $47,150 |
| 22% | $47,151 to $100,525 | $63,101 to $100,500 | $94,301 to $201,050 | $47,151 to $100,525 |
| 24% | $100,526 to $191,950 | $100,501 to $191,950 | $201,051 to $383,900 | $100,526 to $191,950 |
| 32% | $191,951 to $243,725 | $191,951 to $243,700 | $383,901 to $487,450 | $191,951 to $243,725 |
| 35% | $243,726 to $609,350 | $243,701 to $609,350 | $487,451 to $731,200 | $243,726 to $365,600 |
| 37% | $609,351 or more | $609,351 or more | $731,201 or more | $365,601 or more |
| Source: IRS | ||||
Short-Term Capital Gains Tax Rates for 2025
Each year, the IRS updates the income brackets for its tax rates, although the rates themselves typically remain steady. If you realize net short-term capital gains in 2025, these will be taxed according to the following brackets, based on your filing status:
2025 Tax Brackets (for returns filed in 2026)
| Tax Rate | Single | Head of Household | Married Filing Jointly or Qualifying Widow | Married Filing Separately |
| 10% | $0 to $11,925 | $0 to $17,000 | $0 to $23,850 | $0 to $11,925 |
| 12% | $11,926 to $48,475 | $17,001 to $64,850 | $23,851 to $96,950 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $64,851 to $103,350 | $96,951 to $206,700 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $197,301 to $250,500 | $394,601 to $501,050 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $250,501 to $626,350 | $501,051 to $751,600 | $250,526 to $375,800 |
| 37% | $626,351 or more | $626,351 or more | $751,601 or more | $375,801 or more |
| Source: IRS | ||||
Short-Term vs. Long-Term Capital Gains Tax Rates
When selling most types of assets for a profit, capital gains taxes will generally apply. The rate you pay hinges on how long you owned the asset prior to selling, alongside your taxable income and filing status. For both short- and long-term capital gains, the taxes you owe are computed based on your net gains.
The IRS favors buy-and-hold investing, as evidenced by the lower tax rates for long-term capital gains. In contrast to the ordinary income rates applied to short-term gains, long-term gains enjoy more favorable tax rates of 0%, 15%, or 30%. Most taxpayers will find their long-term capital gains taxed at no more than 15%.
Smart Strategies to Minimize Short-Term Capital Gains Taxes
Since the IRS treats short-term capital gains as ordinary income, expect to pay a heftier tax rate on these profits compared to long-term gains. If you’re a frequent trader with a successful year behind you, your net capital gains could elevate your taxable income and potentially push you into a higher tax bracket.
To keep your short-term capital gains taxes in check, consider these savvy strategies:
- Hold Investments for a Year. To take advantage of the lower long-term capital gains rates, consider holding off on selling until you hit that one-year mark.
- Offset Gains with Losses. If waiting isn’t an option, you can offset some or all short-term capital gains by realizing short-term losses. This approach, known as tax-loss harvesting, can significantly reduce your capital gains tax burden. And if your total losses exceed your gains for the year, you could reduce your taxable income by up to $3,000 annually.
- Utilize Tax-Advantaged Accounts. Capital gains taxes only kick in on profits realized in taxable accounts. Hence, by trading in tax-advantaged accounts, like IRAs, you can avoid short-term capital gains taxes altogether. While an IRA is designed for retirement savings, you can actively trade within it without incurring taxes on profits—just remember that withdrawals from a traditional IRA will be taxed at ordinary income rates.
