I keep hearing conflicting information about taxes on short term capital gains, are we taxed at 40% rate for the profits or will it be based on your tax bracket after a combination of your income, profits, etc. does anyone have any idea where does the 40% tax rate on short term capital gains come from?
Taxes on short term options gains?
byu/AlternativeOk7564 inoptions
Posted by AlternativeOk7564
3 Comments
Short-term capital gains are taxed at similar rates to ordinary income, 0% to 37% depending on the tax bracket the trader’s total net earnings fall under. While capital gains are a separate tax category, they are ultimately factored in as a part of overall income when determining one’s tax liability / bracket.
That 40% taxation you cited may relate to the special blended tax rate for capital gains on SPX options, which are taxed 60% at the long-term capital gains rate and 40% at the short-term capital gains rate, regardless of the holding period.
It’s taxed like your income. Nothing conflicting.
Very simple.
Short term = taxed like ordinary income brackets
Long term = taxed per capital gains tax brackets