The short-term capital gains tax rate on stocks is the same as your ordinary income tax rate: for 2026, that runs from 10% to 37% federally, depending on your total taxable income and filing status. A stock counts as short-term if you held it for one year or less before selling. Higher earners owe an additional 3.8% net investment income tax on top of the regular rate, which can push the effective federal rate above 40%. State tax is separate and can add several more percentage points.
2026 Federal Rates on Short-Term Stock Gains
Because a short-term gain is taxed as ordinary income, it slots into the same brackets as your wages. For 2026, the federal rates and thresholds are:
- 10%: up to $12,400 (single) or $24,800 (married filing jointly)
- 12%: $12,401 to $50,400 (single) or $24,801 to $100,800 (married filing jointly)
- 22%: $50,401 to $105,700 (single) or $100,801 to $211,400 (married filing jointly)
- 24%: $105,701 to $201,775 (single) or $211,401 to $403,550 (married filing jointly)
- 32%: $201,776 to $256,225 (single) or $403,551 to $512,450 (married filing jointly)
- 35%: $256,226 to $640,600 (single) or $512,451 to $768,700 (married filing jointly)
- 37%: over $640,600 (single) or over $768,700 (married filing jointly)
These are marginal brackets. Only the income falling inside a given band is taxed at that band’s rate, and a short-term gain doesn’t get its own separate rate. It gets added to your other income and taxed at whatever bracket it lands in.
A practical example: a single filer earning $55,000 in wages who realizes a $10,000 short-term stock gain has $65,000 in taxable income. The first $12,400 is taxed at 10%, the next slice at 12%, and the top portion at 22%. If part of the gain crosses a bracket boundary, only the amount above the line is taxed at the higher rate.
Filing status matters. Married couples filing jointly get roughly double the bracket width at most levels, so the same household income is taxed more gently than it would be for a single filer.
What Makes a Stock Sale Short-Term
The IRS defines a short-term capital gain as profit from selling a capital asset you held for one year or less, and it enforces that cutoff to the day. Your holding period starts the day after you buy shares and ends on the day you sell. Buy on March 1, 2026, and the earliest you can sell for long-term treatment is March 2, 2027. Sell on March 1, 2027, and the gain is still short-term.
The trade date controls this, not the settlement date. Brokerages usually take a day or two to finalize the transfer of funds and shares, but that processing lag doesn’t count. For securities traded on an established market, the holding period begins the day after the trade date you bought and ends on the trade date you sold.
The 3.8% Net Investment Income Tax
Higher earners face an extra layer. The net investment income tax adds 3.8% on top of the regular rate once modified adjusted gross income exceeds $200,000 for single filers, $250,000 for married filing jointly, or $125,000 for married filing separately. These thresholds are not indexed for inflation, so they catch more taxpayers each year as wages drift up.
The 3.8% applies to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold. Short-term stock gains count as net investment income. A single filer with $230,000 in modified adjusted gross income and $50,000 in short-term gains owes the extra 3.8% on $30,000, adding $1,140. Combined with a 35% marginal rate, the effective federal rate on that gain approaches 39%.
Why the One-Year Mark Matters So Much
Stocks held longer than one year qualify for long-term capital gains rates, which for 2026 are 0%, 15%, or 20% depending on income. A single filer with taxable income under $49,450 pays nothing on long-term gains. Between $49,450 and $545,500, the rate is 15%. Above $545,500, it climbs to 20%.
The dollar difference is real. A single filer in the 32% bracket who sells stock for a $20,000 profit after eleven months owes roughly $6,400 in federal tax. Waiting one more month to cross the one-year line drops the rate to 15% and cuts the tax to $3,000. That’s $3,400 saved by holding for another few weeks. This is the single biggest reason to think twice before selling a profitable position that’s close to its anniversary.
Netting Losses Against Gains
The IRS requires you to net your short-term gains against your short-term losses before calculating tax. Made $8,000 on one trade and lost $3,000 on another? Only the net $5,000 is taxable as a short-term gain.
If your total capital losses for the year exceed your capital gains, you can deduct up to $3,000 of the excess against ordinary income like wages ($1,500 if married filing separately). Anything beyond that carries forward to future tax years indefinitely, reducing future gains or income until it’s used up. The carryforward can be valuable, but the $3,000 annual cap against wages means a large loss takes years to fully absorb. Someone who lost $30,000 in a bad year and has no future gains would need a decade to deduct the full amount against wages.
Watch the Wash Sale Rule
Sell a stock at a loss and buy the same stock, or something substantially identical, within 30 days before or after the sale, and the IRS disallows the loss deduction. The window covers 61 days total: the 30 days before the sale, the sale date, and the 30 days after.
The disallowed loss isn’t gone forever. It gets added to the cost basis of the replacement shares, so you eventually recoup the tax benefit when you sell those. But for the current year, the deduction is off the table. Selling on December 15 to lock in a loss, then buying the same shares back on January 5, kills the deduction. The simplest fix: wait at least 31 days before repurchasing, or buy a different stock in the same sector if you want to keep similar market exposure.
State Tax on Top of the Federal Rate
Federal tax is only part of the bill. Most states tax short-term capital gains at the same rate as ordinary income, which can add roughly 3% to over 13% depending on where you live. Nine states impose no personal income tax at all, so short-term gains escape state tax entirely there: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
In a high-tax state at the top brackets, the combined federal and state burden on a short-term gain can exceed 50%. That’s worth factoring into any decision about whether to sell now or hold for long-term treatment.
You May Owe Estimated Tax Payments
Unlike wages, investment gains have no automatic withholding. If your trading creates a meaningful tax liability, you may need to make quarterly estimated payments to avoid an underpayment penalty. The IRS generally imposes the penalty if you owe more than $1,000 at filing and haven’t met a safe harbor.
The safe harbors: pay at least 90% of your current-year tax liability, or 100% of last year’s total tax (110% if your prior-year adjusted gross income exceeded $150,000). For 2026, quarterly deadlines are April 15, June 15, and September 15 of 2026, plus January 15, 2027. If you realize a large gain in August, you don’t have to retroactively cover earlier quarters, but a payment by the September deadline limits the penalty.
Trading Inside a Retirement Account Sidesteps All of This
Short-term capital gains rates don’t apply to stocks held inside a traditional IRA, Roth IRA, or 401(k). You can buy and sell as often as you want inside these accounts without triggering capital gains tax. In a traditional IRA or 401(k), you pay ordinary income tax on withdrawals in retirement. In a Roth IRA, qualified withdrawals are tax-free. For active traders, keeping the turnover inside a retirement account removes the short-term gains problem entirely.