What tax rate applies to short-term capital gains?

What tax rate applies to short-term capital gains?

• A. Fixed tax rate
• B. Ordinary income tax rates apply
• C. Zero percent tax rate
• D. Long-term capital gains tax rate

Answer: (B)

Short-term capital gains are profits from the sale of assets held for one year or less. These gains are treated as ordinary income for tax purposes, meaning they are taxed at the same rates that apply to an individual's regular income, such as wages or salary. The ordinary income tax rates are progressive, ranging from 10% to 37%, depending on the taxpayer’s total income level. This treatment contrasts with long-term capital gains, which apply to assets held for more than one year and are taxed at lower rates, generally ranging from 0% to 20%, depending on the taxpayer's income level. A fixed tax rate or a zero percent rate does not apply to short-term capital gains, reinforcing the understanding that these gains are not subject to special treatment like long-term gains.

Short-term capital gains are profits from the sale of assets held for one year or less. These gains are treated as ordinary income for tax purposes, meaning they are taxed at the same rates that apply to an individual's regular income, such as wages or salary. The ordinary income tax rates are progressive, ranging from 10% to 37%, depending on the taxpayer’s total income level.

This treatment contrasts with long-term capital gains, which apply to assets held for more than one year and are taxed at lower rates, generally ranging from 0% to 20%, depending on the taxpayer's income level. A fixed tax rate or a zero percent rate does not apply to short-term capital gains, reinforcing the understanding that these gains are not subject to special treatment like long-term gains.