A capital gain realized by the sale or exchange of a capital asset that has been held for exactly one year or less. Short-term gains are taxed at the taxpayer's top marginal tax rate.

A short-term gain can only be reduced by a short-term loss. A taxable capital loss is limited to $3,000 for single taxpayers and $1,500 for married taxpayers filing separately.



Short-term gains and losses are netted against each other. For example, assume a taxpayer purchased and sold two different securities during the tax year: Security A and Security B. If he/she earned a gain on Security A of $5,000 and a loss on Security B of $3,000, then the net short-term gain is $2,000 ($5,000 - $3,000).