Chip-Stapleton-20-How do short-term and long-term capital gains differ
Chip Stapleton explains that capital gains are taxed differently depending on how long you hold an asset—short-term gains (held less than a year) are taxed at regular income rates, while long-term gains (held over a year) are taxed at lower rates, potentially saving you money.
Video Transcript
There are two types of capital gains rates. There's long term capital gains and there's short term capital gains. They're actually taxed in two different ways.
Short term capital gains are going to be taxed at your normal income levels. So if you're in the twenty four percent tax bracket, that five hundred dollars is going be taxed at twenty four percent. It's going to be roughly one hundred and twenty dollars worth of taxes. Your gains become short term if you've held that asset for less than a year. If you sold that asset that quickly, so less than a year after you bought it, all those gains are gonna be short term capital gains taxed at your normal income tax rate.
Long term capital gains, if you held the asset for more than a year, there's set of rates you'll be taxed at. It starts at zero percent, there's a fifteen percent middle ground, and then the highest rate's twenty percent.
So if you're in that fifteen percent range, which is the majority of American households fall in that range, then that five hundred dollar gain will get you something like seventy five dollars worth of taxes. So just going holding that asset for longer than a year saved you forty five dollars in taxes.
