Short vs Long-Term Capital Gains Hold Breakeven
Example: Realized gain amount: 25000 $ · Taxable income (before this gain): 100000 $ · Filing status (0 = Single, 1 = Married Filing Jointly): 0 · State income tax rate on gains: 5 %
| Tax saved by holding for long-term treatment | $2,183 |
| Tax if sold short-term (federal + state) | $7,183 |
| Tax if sold long-term (federal + state) | $5,000 |
| Savings as % of gain | 8.73% |
Worked example
A single filer with $100,000 in taxable income realizes a $25,000 gain. Short-term: the gain is ordinary income taxed at 22% federal + 5% state = $6,750. Long-term: the 15% LTCG rate + 5% state = $5,000. Holding one extra day saves $1,750 — a 7% return on the gain simply from timing. At higher incomes, the spread widens significantly.
Frequently asked questions
Does the holding period reset if I buy more shares?
No. Each tax lot has its own holding period based on the purchase date. Buying more shares does not reset the clock on earlier lots. Selling specific lots (using specific identification) lets you choose which lots to realize gains on.
What states treat capital gains as ordinary income?
Most states tax capital gains as ordinary income at the same rate as wages. A few states (like California) apply the full state income tax rate to all capital gains regardless of holding period. Seven states have no income tax at all. Enter your state's rate to get an accurate combined picture.
Is the 3.8% Net Investment Income Tax included here?
Not in this tool — use the separate NIIT calculator for high-income filers (MAGI above $200k single / $250k MFJ). NIIT adds 3.8% on top of LTCG rates, making the combined federal LTCG rate 18.8% (15%) or 23.8% (20%) for affected filers.