Short-term capital gain is the profit gained from the sale of a property that was owned for less than one year. Short-term capital gains are taxed at normal income tax rates.
While capital gain refers to any profit gained from selling property, short-term capital gain refers to profit that comes from the sale of a property that has only been in the seller’s possession for less than one year.
Short-term capital gain is calculated by subtracting the price initially paid for the property from the amount received upon selling it. If the net total of the short-term capital gain indicates profit, then that amount will be taxed at the taxpayer’s ordinary income tax level.
The capital gains tax rates for single filers and married couples are different. And short-term capital gains tax rates are higher than long term capital gains tax rates.
The amount of short-term gains the seller is taxed for can be reduced by short-term capital losses. For example, let’s say that in one year a taxpayer buys and sells two properties. If one property sells for a gain of $6,000 dollars and one sells for a loss of $2,000, the taxpayer will only be taxed for a total of $4,000.