Short Term Capital Gains Tax

Short term capital gains tax is something that exists in tax laws that effects only capital gains made on assets that have been held for less than one year.

The reason that there is a distinction between long and short term capital gains taxes is because the longer you have an asset the more money you make so long term assets will be taxed more than short term ones.

Let's say you have an asset that you sell after owning it for less than a year. In all honesty you probably didn't make very much money on it. Although it's possible for someone to make quite a bit of money on a 12 months or less asset it is normal that you will make money on longer investments. You must pay more money on taxes on assets that are longer term.

Part of the reason that the United States chose to do this is to compensate because of the changes of the value of money over years. For example if the prices of things in general have tripled in 5 years, then if you sell something for three times it s price 5 years after you buy it you really did not gain anything at all.

Other countries have rules that are much the same as the ones that are here now. In India if you have an asset for less than one year your tax is 10% on the gains. If you own the asset for years or more then you owe 20%.

Capital Gains tax helps the economy because it gives the state back money in return for providing you with residents to make it so you can make money. Some people feel that taxing people on the money they make is unfair. However, this is a necessary evil. If we did not pay taxes on money that we make on investments the economy would not stabilize itself to the point of being able to provide people with such opportunities.

If you need help determining if your sale counts as a capital gain or not. Also if you need help figure out whether it is a short term or long term gain contact the Internal Revenue Service or a local tax professional to help you figure it out. If you feel more comfortable on the computer you can also look it up online.