Capital Gains Taxes Explained: Short-Term Capital Gains vs. Long-Term Capital Gains

One of the main ways to profit from investing is to buy assets at one price and then sell them at a higher price. These types of profits are known as capital gains. As with most kinds of profits, they're subject to taxes. There are two types of capital gains: short term and long term. Taxes can impact the growth of your portfolio, so it's important to understand how capital gains taxes work and learn some strategies that could potentially minimize them.
Subscribe to our channel: bit.ly/Subscri...
Click here for more insights and education: www.schwab.com/...
(0122-1W6X)

[@Zac9]

Thank you good man, no one ever explains it like this , this is so simplified

[@ImperialEarthEmpire]

i only recently learn about stock market / investment and dreaming of becoming rich, suddenly videos about taxes end up in my feed... damn you taxes! killing my dream!

[@koollee]

You wouldve killed your own dream if u turned a blind eye to taxation

[@luhole]

2:23 what??? Why is the $82k income going into the $45k tax bracket bucket? This infographic makes no sense to me.

[@chasejankoski9779]

You get taxed at 10% for 9,875 of the 82,000. Get taxed at 12% for 30,250 of the 82,000. Then get taxed at 22% for 41,875 of the 82,000. Short-Term capital gains are additional income meaning the IRS sees your income as 82,000 + 12,000. This means the additional income is taxed at 22% since the previous buckets are full.

[@jumper163]

You pay the rate up to the amount in that bracket. So the first 9,875 of your 82,000 is taxed at 10%. The next 30,250 is taxed at 12% and the rest of the initial income is taxed at 22%.

[@luhole]

@@jumper163 Ahhhhh gotcha! Thank you 🙏

[@ryanshannon6963]

Not understanding how the tax brackets actually work is why most people complain about the tax system. Honestly, we should be using a VAT system, but the larger corporations don't like that because there's no "loopholes" to duck your liability into. Secondly, the personal tax services economy in the US is so f*cking large (billions of dollars of essentially wasted economic resources) HR Block, Jackson Hewitt, etc...don't want any wind of that. With that said, you can find what the tax brackets are and you apply that to the appropriate "bucket" or "tranche" of your income. (This is why maximizing your deductions is very important, since you can keep some money out of those buckets so that hopefully you'll land yourself in a substantially lower income bucket at the end, thus reducing your liability). Mind you, this is just federal income tax rate and doesn't take into consideration Social Security (I think capped at your first $160k, but talk to your advisor as I'm not liable being some "random" on the internet), state income tax and medicaid/medicare. If you're unsure, look at what the maximum bracket is, if you're making more than the minimum of the largest bracket, add that to the largest state income bracket (if you have state income tax), then squirrel away at least that amount of your profits away for tax and you'll *probably be fine* . I generally do 50% just because it's easy and generally covers my tax liability as well as gives me a small tax return at the end of the year.

[@luhole]

@@ryanshannon6963 Thanks for your reply. I did actually know about paying at the separate rates until you get to your bracket, but evidently my brain pushed the information back out again. Fortunately I'm Australian, so I don't have to deal with separate federal taxes, or Social Security, but I am a freelancer and filing for yourself can get pretty complex. Consequently I have some amazing accountants, who I'm incredibly grateful for.

[@danp4350]

Great video. If I contribute weekly to a particular stock in a taxable brokerage account, when I sell, will it be a blend of short term and long-term capital gains taxes if I have been using this investment strategy for over 52 weeks? If this question doesn’t make sense please let me know But having an answer to this question to on would help me greatly. Thank you

[@CharlesSchwab]

Hello, we appreciate that you reached out! Please send us a private/direct message for additional direction. You can contact us at 1-800-435-4000, or log in to Schwab.com to initiate a secure chat for assistance. Representatives are available 24/7. They can see what positions you have in your account and advise accordingly. ^CH

[@dandanhu886]

So if i decided to sell all of my snp500 etf that i was holding for 20 years (i was buying one stock everymonth) how do i calculate the capital gains of that sale

[@CharlesSchwab]

Consult your own tax advisor for that information. Your situation may be different from others, so it's best to talk with a tax advisor who also has knowledge of trading and investing. ^BW

[@michaelallen9571]

Just know that they will screw u, its really unfortunate. You invest your money that's ALREADY been taxed once. But that's not good enough for them. They want a cut of your hard work and investment too. Good luck to you! I wish u well with your investment and hope u can beat the system somehow

[@bnsrks3326]

Your brokerage will send you a tax statement at the end of the year that will break down the net proceeds as well as profit/loss. When you file your taxes you or your tax professional will input that info the return to determine how much you’d owe.

[@3namechangezalowdevry90day7]

Log into your brokerage's web site then call their 800 number if you can't see where the downloadable tax forms are.

[@3namechangezalowdevry90day7]

​@@michaelallen9571Long term cap gains are taxed way lower than interest income! It's a bargain.

[@33cltn]

So how does trading work? Should I avoid selling as a beginner? I would like to learn how to make a profit off trading.

[@Paolo1964]

Great video

[@jwol11741]

I thought if you put it back in the market within a certain time it's not considered realized. So any time you sell with profit its automatically taxed?

[@CharlesSchwab]

If you have a particular situation you might want to check with your tax advisor. For something more general, discuss your concern with a broker at 800-435-4000. ^CH

[@jrc2858]

Hello, if holding a stock longer than 1 year, and after that you sell, will be taxed at 15% long term capital gain. If sold in april 2024, with a sizable capital gain, do we need pay 15% taxes in this 2024 year or can wait till 2025 income tax filling ? will this incur a penalty tax?

[@CharlesSchwab]

Hello and thank you for reaching out. While we can only offer limited support through social media, our specialists are happy to assist. To discuss your concern with a broker, please call 800-435-4000 or initiate a secure chat session on Schwab.com, available 24/7. ^CH

[@jaketyler2788]

You pay 2024 taxes in 2025. Any trades in 2024 will be paid in 2025. Tax penalties are weird: basically, you're supposed to make estimated payments quarterly, but this is usually accomplished via your W-4 paycheck tax withholding. It's tricky because the penalty ultimately depends on how much tax you owe come 2025, which some people won't know until 2025 (considering extra income and deductions). In summary, the IRS doesn't make it easy. Personally, I would recommend not screwing around with making quarterly payments, and just pay the small penalty come tax season (if you even end up having a penalty).

[@3namechangezalowdevry90day7]

​@@jaketyler2788Or, you can set up withholding with your banks/ broker. One time hassle to avoid paying quarterly.

[@davidbrooks8809]

So basically you're screwed anyway it goes and then they wonder why Americans can't get ahead😮😢

[@Nitropig]

We still have one of the best opportunities in the the planet. Its unfair yes but you could also move to Africa and then you realize it isn’t so bad in the us

[@o.gingras]

Question: If I open a new account and get 11 stocks. If I sell/buy one of the stocks and keep the 10 others in place, how is that separated into long and short term financial gain?

[@CharlesSchwab]

Hello and thank you for reaching out. While we can only offer limited support through social media, our specialists are happy to assist. To discuss your concern with a broker, please call 800-435-4000 or initiate a secure chat session on Schwab.com, available 24/7. ^CH

[@MRkriegs]

Under a year = short term. Over a year = long term. Doesnt matter if u sell 1 stock or 1,000 stocks it's about length of time held before being sold

[@gixxer7907]

If i sell in this month, next month or January, when do I have to pay capital gains by? Is it april 2025 or later than that? When does the 2024/2025 year start?

[@CharlesSchwab]

We encourage you to check with your accountant or tax advisor for your particular situation and account types you are working with. ^CH

[@koollee]

New years dingaling head. What u expect lol

[@gixxer7907]

@@koollee I dunno that's why I asked. I sold btc in November and I haven't reported capital gains. Somebody said the deadline would be January 2026? I'm in the UK btw

[@The_Practical_Bond]

So if he sold $50 of the stock and kept the $10 in, would he still have to pay taxes on it? Sounds like no

[@Marques127]

Hello, if u keep stocks for let's say 20 years and never sell, and right before selling u move to Belgium for example where u don't pay capital gains tax. Is that possible to avoid paying capital gains?

[@CharlesSchwab]

While we can only offer limited support through social media, our specialists are happy to assist. To discuss your concern with a broker, please call 800-435-4000 or initiate a secure chat session on Schwab.com, available 24/7. ^CH

[@joeking19]

Probably not if you lived in the US when you bought the stock. I'm not an accountant but I did stay at a Holiday Inn Express last night!!

[@Marques127]

@@joeking19 a haha haha haaaaa fucking geek

[@sankeyscott]

So what happens if I hold 100 ABC stocks for over a year, then add 1 ABC stock and sell 1 ABC stock a week later. Would the profit from the sell of 1 ABC stock be considered long or short term capital gain?

[@CharlesSchwab]

For Schwab clients, the first-in, first-out (FIFO) method is the default for all securities, except mutual funds. So for your question, by default it would be a long term capital gain. However, be sure to confirm with Schwab directly: 1 [phone]. ^MF

[@victorLC109]

Long term on 100 shares short term on one share

[@saidqamqami5716]

Are the international investors non resident in state concerned by such taxes

[@CharlesSchwab]

Please check with your tax advisor or accountant as to any tax questions. We cannot advise on tax questions. ^CH

[@FreindlyBTW]

Question, if I have a reoccurring investment going for 5 years and its still going at the end of when I sell, will I get taxed for the whole as a short term investment or some as part of long term investment and short term, just curious

[@CharlesSchwab]

There are a couple of initial points that need to be considered. First, the type of investment you're making can effect the tax treatment. Next, if you're investing in equities then investments held for more than one year will be taxed at a long-term rate, less than a year at a short-term rate. So, with equities you'd likely have a combination of long and short-term tax rates when you sell. ^MF

[@220Dave220]

What if I have capital gains on several trades, and capital losses on several others? Do I pay taxes on all the winning trades? Or only on the net gain for the year?

[@CharlesSchwab]

Hello and thank you for reaching out. While we can only offer limited support through social media, our specialists are happy to assist. To discuss your concern with a broker, please call 800-435-4000 or initiate a secure chat session on Schwab.com, available 24/7!

[@Michael-kv5ff]

You don't pay taxes if you are net negative you don't pay taxes on the winnings if you lost the same amount

[@jaketyler2788]

You only pay taxes on a net gain, not a net loss. The net is determined by subtracting your yearly losses from your yearly gains. If you have a net loss, you can only write-off $3,000 per year and the rest will be suspended (saved) to write-off in future years.

[@marcpi8381]

Why is taking a loss to lower tax a strategy? Your offsetting dollar to dollar so net loss is the same whether I cut a check to IRS or sell at a loss. What am I missing?

[@hainguyenhoang1031]

Let me give you an example. You bought 100 shares of stock A at cost of $100 each. The stock went south to $80 each. If you sell the stock and realize the loss of $2000, you can lower the tax you have to pay. Later you can buy the stock back at $80, so you still own the same 100 shares of stock A, but you pay less tax for that year. The cons are now the stock cost at $80 so you may have to pay capital gain later if it goes back to $100.

[@CharlesSchwab]

The strategy is used to offset capital gains with capital losses, reducing the overall tax liability. When you sell an investment at a loss, you can use that loss to reduce your taxable income, which can lead to a lower tax bill. The strategy can be useful when you have realized capital gains that you need to offset. ^MF

[@bsneha1]

So long term gain tax is independent of regular w2 income ? Per say my w2 is 100k and then my long term tax gain is 30k ... I will not pay any tax on the capital gain

[@CharlesSchwab]

Yes, long-term capitial gains tax on eqiuties is different from regular income. For other questions that are more specific to your account(s), please contact Schwab at 800-435-4000. ^MF

[@jaketyler2788]

They are independent. However, your capital gains tax rate is BASED on your regular income. Therefore, you will pay 15% capital gains tax on the $30K.

[@budnino8752]

If I made a million long term but only took out 100 thousand. How much do I owe in taxes and what was taxed?

[@CharlesSchwab]

Hello and thank you for reaching out. While we can only offer limited support through social media, our specialists are happy to assist. To discuss your concern with a broker, please call 800-435-4000 or initiate a secure chat session on Schwab.com, available 24/7. ^CH

[@jaketyler2788]

You only pay taxes on the gains of what was sold. Your capital gains tax rate is based on your taxable income. If you sold $100K, determine how much gain that was, for example $90K. Most people fall into the 15% bracket, so you would owe $13.5K.

[@SebLuci]

Here's a question I invested my money in the penny stock that's very bullish so what happens if I make a couple million off capital gains and refuse to pay it you know I go on a run like Charlie Sheen and spend it all then quit my job and become homeless live with a friend and have no assets what would happen 10 million dollars worth of stocks I'm not giving the government 50% of it f that I'd rather spend it like Charlie Sheen and have fun and then just own nothing for the rest of my life and hell if I get to retire in a jail that's fine free food free bed to sleep. Don't tell me prison food is crap there are starving Africans that give their lives to have the Canadian ship prison food. So once again what would happen if I make 10 million on stocks and then I spend it all😊

[@CharlesSchwab]

Consult your own tax advisor for tax advice specific to your circumstances. ^BW

[@koollee]

Youll go to jail, as u wished.. where your sweetbutt might get over taxed at night lol

[@jaybartgis5148]

So why don't 401k's get charged at the capital gains rates.

[@CharlesSchwab]

We can't really comment on taxes, but it's well know that 401(k) dollars are pre-tax dollars and are taxed when they are paid out. ^CH

[@jaybartgis5148]

@@CharlesSchwab just the original investment is taxed or both the original investment plus the capital gains?

[@MRkriegs]

​@@jaybartgis5148both

[@sillygoose885]

Depends on the type of 401k. If it is a traditional 401k you be taxed on the contribution and earnings when you withdraw. It is a Roth 401k your contributions are taxed upfront and when you withdraw your money it'll be "Tax free"

[@SmokieNColors]

I started investing 2 months ago and made around 100k in call options in gme and didn't know about this. Im regarded 💀

[@manuelmanuel3968]

Just use turbo tax to calculate how much you owe.

[@sethgerber2132]

Yeah and what about kamala's proposed 25% tax on unrealized capital gains, then what

[@CobbleStun]

That’s only for profit above 100,000 dollars

[@sethgerber2132]

@CobbleStun I own a piece of property I bought for $6000 dollars when I was 20 years old. I'm 41 years old now, I've paid the property taxes on it every year. It's now valued at $120,000. I don't have $25,000 dollars to pay this tax. That means I have to sell it. How is that fair?

[@danr8502]

Kamalas tax would affect 9850 people in America..

[@stevelucky7579]

@@danr8502if true, that level of scope would almost suggest that laws were being targeted towards specific individuals rather than a law for anyone. Unless you expect inflation to eventually push more people into that class, and the people who were in that class into a higher class. Like snaking a higher tax rate starting at those at the top, raise inflation so it works its way from a higher class to a slightly lower class to a slightly lower class to even lower until everyone at the bottom ends up paying that 25%.

[@stevelucky7579]

@@CobbleStunwas that a typo or did she actually say $100,000.00 because people sell houses for around $150,000.00 on the cheaper end.

[@CrypticArtsStudios]

All theft...

[@ElChuntyCabra]

Hey politicians have to pay for their hookers and cocaine somehow

[@jasonthomspon7829]

Extortion actually.

[@TheLoraxWasRight]

If you don’t like using public roads and bridges and being protected by a military… yeah I guess you can call it that

[@jasonthomspon7829]

@MAGACult With that logic, you can allow a criminal to come into your home and hold you at gunpoint whilst they take the majority of your belongings, but as long as they pay to fix a couple of your broken things every now and again it's okay. Keep licking them boots.😁😁

[@pnoyguitar]

More like gambling

[@Bondbeer]

Here is a brain teaser. True or False? At a certain income level, generating additional income as long term capital gains cost more in tax than generating the same additional income in short term capital gains or ordinary income.

[@hainguyenhoang1031]

It never happens. All long term capital gain tax bracket are lower than income tax bracket.

[@Bondbeer]

Ah ha. In fact it does. If your married filing joint and your income is $94,050 the next $250 of income will be taxed at 15% for long term cap gain but only 12% for ordinary income or short term gain. Above $94,300 would then be 22%.

[@joeb1522]

​@keithmachado-pp6fv If your marginal tax rate is in the 10% or 12% income tax bracket, long-term capital gains and qualified dividends are taxed at 0% (not 15%). Ordinary rates are always the same or more than capital gain rates.

[@Bondbeer]

Joe that is not correct. Reread my explanation. The zero cap gain bracket ends at $94,050 for married filing jointly and the 12% ordinary income bracket goes to $94,300, therefore if you have $90k of ordinary income and $4,050 of capital gains and add $250 of ordinary income or short term gain or non qualified dividends you are still in the 12% bracket but if you add $250 of long term cap gains or qualified dividends they will be taxed at 15%. Look up the IRS tables.

[@Valyssi]

It's a fun factoid but in the worst case scenario it amounts to 1 cup of coffee worth of extra taxes 😂

[@TheDeven1000]

That sounds so stupid to me…how you gonna tax me on it for what it “might be worth,” even thought I haven’t sold it! Can someone explain to me how this is fair?

[@sethgerber2132]

It's not fair, it's communist

[@NullsetInStone1]

It's similar to property tax on real estate. The government will apply an appraised value on your current wealth and subject you to a tax upon it. You get taxed on real estate even if you have not sold it.

[@sethgerber2132]

@NullsetInStone1 I can barely pay the property taxes on the pieces of property that I've slowly purchased over the past twenty years while I lived poor earning 20k-30k as my yearly income while raising 3 kids , went without vacations, without eating out in restaurants etc with the hopes that one day my investment could be my retirement and I could have something to leave to my kids. These properties have gone up in value. If one property increases in value by 10k I'll be expected to pay the government $2,500. This is a scam to put the middle class out of business and force us to sell out to the top 1%. We were told by WEF that by 2030 we'd own nothing and we'd be happy and obviously this is a step in that direction.

[@TheDeven1000]

@@NullsetInStone1 gay

[@jedinutcracker]

@@NullsetInStone1youre just cool w kamala totally fucking ruining the economy then?

[@grabbingbythe12345]

Who have been the beneficiaries of 50% Capital gain tax? The real estate investors; not the people who buy homes to live. The stock/ crypto traders, who have no real contribution to the economy; the commodity traders (via Asset backed securities and Exchange traded funds) who priced out the real users of those commodities. Think about the thousand of families who have to buy gold for their children's marriage in India and elsewhere. They can't buy gold anymore because the speculators (so called investors) who bought Gold ETFs artificially inflated the Gold price. This whole system is a scam and must be done away with. The first step is tax Capital gain 100% like any other income. Well done Trudeau!

[@koollee]

Cap your flap.

[@poincareconjecture5651]

Ohhh man ...1st law of thermodynamics...no one on Robinhood's laughing now😢

[@aishabintabubakr4944]

Basically, its theft

[@koollee]

Not thoroughly. What roads will u drive on.. dirt roads like the old western days? .. whos gonna try to save your home if it catches fire.. for free? .. Who u gonna call if someone enters your home while youre tucked in for sleepy time.. ghost busters? Its excessive and much is wasted but its not theft. If u call 911 cause gramma fell out, do u not want them to be paid? It will fall out of your arse quicker than the sky lol

[@louisarichardson8392]

to me it a waste time to invest lose all in taxes

[@TUMIDPLAGUE078]

Even if you pay taxes on some of it you still make some too. S&p 500 has gone up 830% in past 30 years or so

[@datguy729]

That's why you're poor

[@ryanshannon6963]

@@datguy729 to their point, why let something else do all the working for you when you can wake up, *every morning*, work an 8 hour shift for a paycheck. Take a 1 hour break. Work *another 8 hour shift for a paycheck*. Then go home, eat, ideally bathe, sleep and do it all over again for the rest of your life?? I pay less taxes *and* I know I'm making money because I worked for 16 hours yesterday!!! *why in the world* would I want to do something nearly completely passive, and reap dividends/returns when I come to a situation in life that makes it appropriate to withdraw with minimum to no tax penalty, such as buying a house or paying for education? The *ONLY* book and education I need, sir, is The Bible! If it ain't in there, you don't need to know it!

[@jeffaragon]

So invest in a roth ira and grow your money and withdraw tax free

[@shannoncargo468]

@@datguy729😂 true