Short-Term vs. Long-Term Capital Gains Tax Rates in 2026

The only thing separating a short-term capital gain from a long-term one is time. If you held the asset for one year or less before selling, the gain is short-term, and the IRS taxes it at the same rates as your salary, which reach 37% in 2026. If you held it for more than one year, the gain is long-term and qualifies for the preferential rates of 0%, 15%, or 20%. Same asset, same profit, very different tax. On a large gain, crossing the one-year mark can cut the bill close to in half.

What counts as short-term

A short-term capital gain comes from a capital asset you owned for one year or less. The clock starts the day after you acquire the asset and runs through the day you sell it. Sell on or before the one-year anniversary and the gain is short-term.

Short-term gains get no special rate. They are taxed exactly like wages, interest, or business income, using the ordinary brackets that run from 10% up to 37%.

What counts as long-term

A long-term capital gain comes from an asset you held for more than one year. In practice that means a year and a day. Hold for 366 days rather than 365, and the gain moves into the long-term category and the preferential rate structure.

Short-term gains stack onto your ordinary income

A short-term gain does not get its own little bracket. It piles on top of your other taxable income and is taxed at whatever ordinary rate applies to that higher range. If your salary already fills the brackets up to 24%, your short-term gain starts being taxed at 24% and climbs from there. That is why a short-term gain for a high earner can feel brutal. It inherits your top marginal rate.

Long-term gains use 0%, 15%, or 20%

Long-term gains ride on a separate, lower rate ladder. Depending on where your total taxable income sits, the long-term rate is 0%, 15%, or 20%. Most middle and upper-middle income sellers land in the 15% band. Only very high incomes reach 20%.

One warning. Do not assume every long-term gain is taxed at 15%. A retiree with low income can pay 0% on part of a gain. A high earner can pay 20% on the top slice. The rate depends on your income, not on the gain alone.

A worked example: 364 days versus 366 days

Take a single filer with $120,000 of taxable income who has a $50,000 gain on a stock. We ran both holding periods through the Capital Gains Calculator.

Sold at 364 days (short-term). The $50,000 stacks on top of $120,000 and falls in the 24% ordinary bracket. The tax is $12,000.
Sold at 366 days (long-term). The $50,000 sits above $120,000 of income, inside the 15% long-term band. The tax is $7,500.

Holding two extra days saves $4,500. Nothing else about the trade changed. Same stock, same gain, same person. The only difference is which side of the one-year line the sale fell on.

Use the Capital Gains Calculator to test your own holding period and income against the same gain.

Does this apply to crypto, business interests, and property?

Yes. The holding-period rule covers capital assets broadly: publicly traded stock, crypto, a stake in a business, and investment real estate all follow the same one-year line. A few asset types carry extra rules on top. Collectibles can face a maximum 28% rate, and depreciated rental property carries unrecaptured Section 1250 gain. Those are exceptions layered on the long-term treatment, not replacements for it.

The takeaway is simple. Before you sell, check the calendar. If you are close to the one-year mark on a sizable gain, waiting can be the cheapest tax move you will ever make.

Open the Capital Gains Calculator to see your short-term and long-term tax side by side before you sell.

Sources

Last reviewed: June 21, 2026.

Frequently Asked Questions

Is one year the cutoff for long-term capital gains?

The cutoff is more than one year, which works out to a year and a day. An asset sold on or before the one-year anniversary of the day after you bought it is short-term. Sell after that and the gain is long-term and qualifies for the 0%, 15%, or 20% rates.

Are all long-term capital gains taxed at 15%?

No. The long-term rate is 0%, 15%, or 20% depending on your total taxable income. A low-income seller can pay 0% on part of a gain, most sellers pay 15%, and only very high incomes reach 20%. The 15% figure is common but not automatic.

Does crypto follow the same short-term and long-term rules?

Yes. The IRS treats crypto as property, so the same one-year holding-period rule applies. Crypto sold within a year is taxed at ordinary rates, and crypto held longer than a year qualifies for the long-term rates.