Short Term Capital Gain Tax Rates For Stock Investment and Day Trading

Short-term capital gains are taxed as though they are ordinary income. Any income you receive from investments you held for less than a year must be included in your taxable income for that year. For example, if you have $80,000 in taxable income from your salary and $5,000 from short-term investments, your total taxable income is $85,000.

The tax you'll pay on short-term capital gains follows the same tax brackets as ordinary income.


Ordinary income is taxed at differing rates depending on your income. It's possible that a short-term capital gain—or part of it at least—might be taxed at a higher rate than your regular earnings. That's because it might cause part of your overall income to jump into a higher tax bracket.

For example, using the 2019 federal income tax rates, and assuming you are filing that income as a single person, you'd be in the 22% tax bracket with your taxable income from your salary. However, because of the progressive nature of the federal tax system, the first $9,700 you earn would be taxed at 10%, your income from $9,701 up to $39,475 would be taxed at 12%, and only the income from $39,475 to $80,000 would be taxed at 22%.

Part of your $5,000 capital gain—the portion up to the $82,199 limit for the bracket—would be taxed at 22%. The remaining $2,801 of the gain, however, would be taxed at 24%, the rate for the next-highest tax bracket.