The difference between how long-term and short-term stock sales are taxed comes down to one core rule: how long you held the shares before selling them.
The IRS uses a strict one-year cutoff to determine your tax rate, rewarding patient investors with significantly lower rates.
Short-Term vs. Long-Term Capital Gains
Short-Term Capital Gains (Held for 1 Year or Less)
If you buy a stock and sell it within one year or less, any profit you make is considered a short-term capital gain.
- The Tax Rate: These gains enjoy no special treatment. They are taxed as ordinary income, meaning they match your standard federal income tax bracket (ranging from 10% to 37%).
Long-Term Capital Gains (Held for More Than 1 Year)
If you hold your stock for one year and one day or longer before selling it for a profit, it qualifies as a long-term capital gain.
- The Tax Rate: Long-term gains are taxed at preferential, lower rates: 0%, 15%, or 20%. Most individual investors fall into the 15% bracket.
Federal Tax Brackets
Your exact tax rate depends on your filing status and your total taxable income for the year (which includes your investment gains).
2026 Long-Term Capital Gains Brackets
| Tax Rate | Single Filers | Married Filing Jointly |
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 |
| 20% | Over $545,500 | Over $613,700 |
2026 Ordinary Income Brackets (Short-Term Capital Gains)
If your gains are short-term, they are added directly to your wages and regular income, hitting these progressive brackets:
- 10%: Income up to $12,400 (Single) / $24,800 (Married)
- 12%: Income up to $50,400 (Single) / $100,800 (Married)
- 22%: Income up to $105,700 (Single) / $211,400 (Married)
- 24%: Income up to $201,775 (Single) / $403,550 (Married)
- 32%: Income up to $256,225 (Single) / $512,450 (Married)
- 35%: Income up to $640,600 (Single) / $768,700 (Married)
- 37%: Income over $640,600 (Single) / $768,700 (Married)
Three Key Rules to Keep in Mind
- You Only Tax the Profits (The “Basis”): You don’t pay tax on the total amount you get from the sale. You only pay tax on the capital gain. For example, if you bought a stock for $1,000 (your cost basis) and sold it for $1,500, you are only taxed on the $500 profit.
- Capital Losses Offset Gains: If you sell a stock at a loss, you can use that loss to cancel out your taxable gains. If your total losses outweigh your total gains for the year, you can use up to $3,000 of the remaining loss to offset your regular job income.
- The High-Earner Surtax: If your Modified Adjusted Gross Income (MAGI) passes $200,000 (Single) or $250,000 (Married Jointly), you may owe an additional 3.8% Net Investment Income Tax (NIIT) on top of your capital gains rate.