Long-term vs. short-term capital gains

Under a year and the gain is taxed like wages; over a year and it gets its own cheaper rate table. On a $25,000 gain, the line is worth $1,750 at an $80,000 salary and $2,820 at $200,000 — and the cheaper table does not kick in on the anniversary itself. The date matters as much as the dollars — TaxGhost counts the days for you.

Run your own dates: stock-sale tax calculator →

The one-year line

The federal rule sorts every sale into exactly two buckets. Sell a stock, fund, or RSU share one year or less after buying it and the gain is short-term: it stacks on top of your ordinary income and pays your marginal bracket, up to 37%. Hold it more than one year and the gain is long-term: it pays 0%, 15%, or 20% depending on where it stacks on the year’s income[2], and at higher incomes the 3.8% net investment income tax[3].

More than one year is the IRS holding-period rule[1]: one year is not enough. The holding period starts the day after you acquire the shares, so the first day a sale can qualify as long-term is the day after the one-year anniversary of your purchase. Sell exactly on the anniversary and the sale is still short-term.

Brokers and tax software count calendar days, but plenty of investors eyeball it, and eyeballing is how a planned 15% sale closes at 32%. The difference at ordinary tech-comp numbers is not a rounding error: on a $25,000 gain, the line is worth $1,750 at an $80,000 salary and $2,820 at $200,000 — real money for waiting what is sometimes a single day.

For RSU shares the clock starts the day after the vest, and your basis is the price on the vest date — the day the shares are actually yours, not the grant date.

The same $25,000 gain, three incomes, two holding periods

One scenario, run six ways: single filer, standard deduction, no other income, buy 1,000 shares at $100, sell at $125 for a $25,000 gain. The only variables are the year’s wages and the holding period.

The long-term column runs on a separate rate table with a break most people never reach: 0% up to $49,450 of taxable income (single, 2026), 15% up to $545,500, and 20% above that[2]. The 15% bracket covers nearly everyone, which is why the three middle long-term rows are flat: the gain pays 15% at every wage level, and the only drift above $200,000 of wages is the 3.8% NIIT, which adds $950 on this gain. How NIIT works →

The 20% band starts higher than most people think. Long-term dollars only pay 20% above $545,500 of taxable income, single. At $600,000 of wages the $25,000 gain is finally entirely above the line: 20% plus NIIT, $5,950. Below that income the “20% long-term rate” you read about is theoretical. The full rate table, with the stacking rule and 0% band examples, lives in the capital gains brackets guide →

One more boundary worth knowing: the 37% ordinary bracket starts at $640,600 of taxable income, single. Even at $600,000 of wages, this $25,000 gain tops out at 35%, which is why the two bottom short-term rows are equal.

The vest-year problem

For RSU-heavy employees, the holding-period question collides with a second timing question: which year the sale lands in. An RSU vest is ordinary income, stacked on your salary like wages, and it can move both halves of the bill.

Same $25,000 gain, same single filer, two different years:

The long-term row moves by $950, and none of it is the capital-gains rate: the gain pays 15% in both years. The entire increase is NIIT, because the vest pushes MAGI from $135,000 to $275,000, across the $200,000 threshold. The short-term row moves by $3,266: the gain stacks at 24% in the quiet year and 35% in the vest year, plus the same $950.

So selling right after a big vest costs more than selling the same shares in a quiet year, at the same price, for reasons that have nothing to do with the stock. The levers are the two this guide is about: the date you sell, and the year the sale lands in. On the year lever, splitting one large sale across December and January is often worth real money; the capital gains brackets guide walks that move.

What this means in practice

• Know your line dates before you need them. TaxGhost’s planned RSU calendar is built for exactly this: it tracks acquisition dates per lot, counts the days for you, and flags the day each lot turns long-term, alongside the bracket position that decides what the sale costs. Planned, not live yet. The math on this page is real today.
• Watch the year, not just the calendar. A vest, a bonus, or a sabbatical changes what the same sale costs by thousands; the vest-year table above is a $3,266 swing on one trigger date.
• Check MAGI against $200,000 before you sell, not after. The $950 surtax in every high-income row above is avoidable only by changing what else lands in the year.
• Short-term is not always wrong. A gain you expect to disappear is worth more than a rate you expect to get. The line is a tool for sales you control the timing of, not a reason to hold a position you would otherwise exit.

Federal income tax only. Capital gains never pay Social Security or Medicare tax; FICA applies to wages and is withheld in payroll. State taxes, the AMT, ISOs, and QSBS are outside this guide’s scope.

The one-paragraph version

Hold a stock one year or less and the gain pays your ordinary bracket, up to 37%, plus 3.8% NIIT above $200,000 MAGI; hold it a year and a day and it pays 0%, 15%, or 20% by where it stacks on your income. On a $25,000 gain that line is worth $1,750 at an $80,000 salary, $2,820 at $200,000, and $5,000 at $450,000, and the year you sell moves the bill as much as the date: a large vest in the same year adds up to $3,266 more. The stock-sale tax calculator → runs your dates and your income through the same math in about ten seconds.

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