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 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.