What is the difference between long-term and short-term capital gains? [Video]

Long-term capital gains are taxed at 0, 15, or 20% depending on your income. Short-term capital gains, however, are taxed at your ordinary tax rate. Thus, if you’re planning to sell a stock, and you can hold on to it for at least 12 months and 1 day, your gain will be taxed at a lower rate. Now if you have a high income you might also incur a net investment income tax of 3.8% on short-term and long-term capital gains. Also, President Biden has proposed to tax long-term capital gains as ordinary income if you have taxable income above $1 million. He wants to increase the top tax bracket to 39.6%, so that means the maximum rate on long-term capital gains would be 39.6% (plus the 3.8% net investment income tax). — Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a …