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If you’re actively trading in a brokerage account, you’ll be on the hook to pay taxes on your profitable trades. The amount of time you’ve owned those investments before selling is a major factor in determining the tax rate you’ll owe on these capital gains.
The IRS classifies capital gains as either short-term or long-term — with the one-year mark serving as the distinction — and treats taxes on these profits differently. While short-term capital gains are taxed like ordinary income, long-term capital gains are taxed at preferential rates.
Short-term capital gains tax rates apply if you sell an investment at a profit that you’ve owned for one year or less.
How do short-term capital gains taxes work?
When you sell various types of assets for more than you bought them, that profit is considered a capital gain. The tax rates are lower for long-term capital gains and higher for short-term capital gains — and whether you owned the investment for one year or less serves as the differentiator.
You will “realize” short-term capital gains when you sell an investment for a profit within one year of buying it. But if you instead sell an asset at a loss, then you’ll realize a capital loss and you won’t have to pay any tax.
The IRS taxes net short-term capital gains — the difference between your gains and losses — at the income tax rate that applies to your taxable income and filing status. Short-term capital gains are taxed as ordinary income, and income tax rates in 2024 and 2025 range from 10 percent to 37 percent.
Because short-term capital gains are treated like income, a net short-term capital gain for the tax year could potentially bump you into a higher tax bracket. That’s especially important to be mindful of if you’re actively buying and selling assets in a taxable brokerage account, including stocks, bonds, cryptocurrencies, exchange-traded funds (ETFs), options and futures.
Short-term capital gains tax rates for 2024
If you realize a net short-term capital gain in 2024, that profit will be taxed at the following income tax rates, based on your filing status and taxable income:
2024 tax brackets (for tax 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 ranges for its seven tax brackets — though not typically the tax rates themselves. Any net short-term capital gains you realize in 2025 will be taxed at the following tax rates, depending on your filing status and taxable income:
2025 tax brackets (for tax 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 you sell most types of assets at a profit, you’ll generally have to pay capital gains taxes. The relevant capital gains tax rate will depend on how long you owned the asset before selling, along with your taxable income and filing status. For both short- and long-term capital gains, the tax you pay depends on your net gains.
The IRS encourages buy-and-hold investing by taxing long-term capital gains at a lower rate than short-term capital gains. Whereas short-term capital gains are treated like ordinary income, long-term capital gains are taxed at one of three rates in 2024 and 2025: 0 percent, 15 percent or 30 percent. As the IRS notes, most taxpayers will pay no more than a 15% tax rate on most capital gains.
How to minimize short-term capital gains taxes
The IRS treats short-term capital gains as ordinary income, so you’ll pay a higher tax rate on these profits than on long-term capital gains. What’s more, if you’re a particularly active trader — and you’ve had a successful year of trading — your net capital gains will increase your taxable income, potentially pushing you into a higher tax bracket.
To minimize your short-term capital gains taxes, consider the following strategies:
- Wait for one year before selling investments. Because of the preferential rates that apply to long-term capital gains taxes, you may want to hold off on selling investments until that one-year mark has passed.
- Offset gains with losses. It may not always be feasible to wait for a year to push that sell button, in which case you can offset some — or potentially all — of your short-term capital gains by realizing short-term losses. This strategy, known as tax-loss harvesting, can help you minimize your capital gains tax liability. And if you have net capital losses for the year, you could potentially reduce your taxable income by up to $3,000 a year.
- Trade in tax-advantaged accounts. You only have to pay capital gains taxes on the profits you realize in taxable accounts, like a brokerage account. That means you can bypass short-term capital gains taxes by instead using tax-advantaged accounts for active trading. While an IRA is intended for a long-term savings goal of retirement, you can actively buy and sell investments in this account, even within the span of a year, and you won’t have to pay any taxes on those profits. (But keep in mind that all withdrawals of untaxed money from a traditional IRA are taxed at ordinary income tax rates.)
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