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Categories: General Tax Terms

Short-Term Capital Gains refer to the profits earned from the sale of an asset held for one year or less.

When an individual or entity sells a capital asset, such as stocks, bonds, or real estate, and the holding period is one year or shorter, any profit from that sale is classified as a short-term capital gain.

These gains are typically taxed at the individual’s ordinary income tax rates, which can be higher than the tax rates for long-term capital gains, which apply to assets held for more than one year. For example, if an investor buys shares of a stock for $1,000 and sells them after six months for $1,500, the $500 profit is considered a short-term capital gain and will be taxed at the investor’s regular income tax rate.

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