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

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

Long-term capital gains are profits from assets held for over a year, while short-term gains are from assets held for a year or less.

How are they taxed differently?

Long-term capital gains are usually taxed at a lower rate than short-term gains, which are taxed as ordinary income.

What are the current tax rates for each?

As of 2023, long-term capital gains rates are 0%, 15%, or 20%, depending on your income, while short-term gains are taxed at your regular income tax rate.

Can you give me an example of each?

Sure! If you buy stocks and hold them for more than a year, any profit is a long-term gain. If you sell them within a year, it's a short-term gain.

What strategies can I use to minimize capital gains taxes?

You can consider tax-loss harvesting, holding investments longer, or utilizing tax-advantaged accounts to minimize capital gains taxes.