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Stocks held over 1 year are taxed at 0%, 15%, or 20%. Stocks held under 1 year are taxed at your regular income rate (10-37%). That difference can save you thousands on a single trade. Here is exactly how it works.
| Short-Term (under 1 year) | Long-Term (over 1 year) | |
|---|---|---|
| How taxed | As ordinary income | Special lower rates |
| Rates | 10% to 37% | 0%, 15%, or 20% |
| Holding period | 365 days or less | 366+ days |
| Strategy | Unavoidable on quick trades | Hold longer to qualify |
(These are approximate and based on projected inflation adjustments.)
| Tax Rate | Single Filer | Married Filing Jointly |
|---|---|---|
| 0% | Up to ~$48,000 | Up to ~$96,000 |
| 15% | ~$48,001 to ~$533,000 | ~$96,001 to ~$600,000 |
| 20% | Over ~$533,000 | Over ~$600,000 |
Note: Taxable income, not total income. Deductions reduce your taxable income.
You made $10,000 profit on a stock trade. Your income puts you in the 24% ordinary income bracket.
| Holding Period | Tax Rate | Tax Owed | You Keep |
|---|---|---|---|
| 6 months (short-term) | 24% | $2,400 | $7,600 |
| 13 months (long-term) | 15% | $1,500 | $8,500 |
Holding 7 extra months saved $900 on this one trade. On larger gains, the difference is even bigger.
Before worrying about taxes, know your actual profit. The Stock Profit Calculator gives you net profit after fees. Then apply the tax rate to that number.
Calculate your stock profit, then estimate taxes.
Calculate Profit →The simplest strategy. If a stock is up and you are not in a rush, wait for long-term treatment. The tax savings compound over a lifetime of investing.
Sell losing positions to offset gains. $5,000 in gains and $3,000 in losses = $2,000 taxable gain. Just avoid the wash sale rule (do not rebuy the same stock within 30 days).
Trades inside a Roth IRA or 401(k) are not taxed on gains. If you actively trade, consider doing it inside a Roth IRA where profits grow tax-free.
Donating stock held over 1 year to charity lets you deduct the full market value without paying capital gains tax. Better than selling, paying tax, and donating the proceeds.
An additional 3.8% surtax applies to investment income (including capital gains) for high earners:
This makes the effective top long-term rate 23.8% (20% + 3.8%) and the top short-term rate 40.8% (37% + 3.8%).
This is educational content, not tax advice. Tax laws change. Brackets are approximate. Consult a qualified tax professional for your specific situation. Our calculator shows pre-tax profit only.
Related: Compound Interest Calculator for after-tax growth projections, Percentage Calculator for quick math.