Short-Term Gain

A short-term gain is profit realized from the sale, transfer or other disposition of personal or investment property known as a capital asset that has been held for one year or less.

The amount of the short-term gain is the difference between the basis of the capital asset, usually the purchase price paid to buy it, and the sale price received for selling it. Short-term gain is taxed at normal income tax rates if the net total is positive. This means short-term gain is usually taxed at the taxpayer's top marginal tax rate, whereas long-term capital gains are taxed at a capital gains rate, which is often lower than a person's 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).

Form 8949, Sales and Other Dispositions of Capital Assets, has instructions to guide you to calculate and report short-term gains. The subtotals from this form are carried over to Schedule D, Capital Gains and Losses.