Short-Term Capital Gains: What You Need to Know

When dealing with short-term capital gains, profits from selling an asset you’ve owned for a year or less. Also called STCG, they sit at the center of everyday tax planning.

The tax you owe comes from the capital gains tax, the rate applied to gains based on your ordinary income bracket. That means if you’re in the 24% bracket, your short‑term gains face a 24% tax, just like wages. A common way to shrink that bill is tax loss harvesting, selling losing positions to offset gains and lower your taxable income. The strategy works because the IRS lets you net losses against gains dollar for dollar, and any excess loss can offset up to $3,000 of ordinary income each year.

Crypto traders feel the impact especially hard. Every swap, token sale, or DeFi yield event that happens within a 12‑month window creates crypto taxes, a subset of short‑term capital gains rules applied to digital assets. Because blockchain transactions are recorded in UTC timestamps, a trade that looks like a long‑term hold on your phone might actually be short‑term on the ledger, pulling you into a higher bracket. That nuance makes accurate record‑keeping essential; otherwise you risk under‑paying and drawing an audit.

When it’s time to file, the forms you’ll need are IRS Form 8949, the worksheet where you list each sale, cost basis, and gain or loss and Schedule D, which aggregates those totals. The workflow looks like this: identify every short‑term transaction, calculate the gain or loss, apply any loss‑harvesting offsets, then plug the net amount into the appropriate tax bracket. By following this chain – short‑term capital gains → capital gains tax → tax loss harvesting → crypto taxes → IRS Form 8949 – you keep the process transparent and stay on the right side of the law. Below you’ll find a curated set of guides that break each step down further, from crypto‑specific examples to detailed filing checklists.