What are long term versus short term capital gains?

When you sell an asset such as stocks, crypto or options any profits you make are considered by the IRS as capital gains which are taxed differently than ordinary income.

If you sell an asset that you have held for a year or more, the profits are considered as long term capital gains and may be taxed at a lower rate than those you held for less than a year at higher short term capital gains rates.

When selling positions, investors often consider whether a position qualifies as a long-term or short-term capital gain to take advantage of the lower taxes for long-term positions.

Learn more here and also from the IRS here.

This is provided for informational purposes only. etoro does not provide tax or legal advice. You should consult with a tax or legal professional to address your particular situation.

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See also:

• What is tax loss harvesting?