What is the long-term holding period?

Why the split matters

Publication 544 says where you report a capital gain or loss depends on how long you owned the asset. Short-term results go in Part I of Form 8949 or Schedule D and long-term results in Part II. The totals are figured separately, and the distinction is essential to arriving at your net capital gain or loss. The publication adds that net capital gain, which is the amount by which net long-term capital gain exceeds net short-term capital loss, may be taxed at lower rates than other income, with maximum rates of 0%, 15%, 20%, 25%, and 28% for individuals in 2025.

How to count the days

The counting rule is exact. Start counting on the day after you acquired the property, and include the day you disposed of it. The publication’s own example: you bought an asset on June 17, 2024, so you start counting on June 18, 2024. If you sold on June 17, 2025, the holding period is not longer than 1 year. If you sold on June 19, 2025, it is longer than 1 year. Applying the same counting, the first long-term sale date for that purchase is June 18, 2025. The calculator above uses that rule: long term means the sale date falls after the anniversary of the purchase date. The publication does not discuss a February 29 purchase, so the tool flags it for review.

Real property and the start date

For real property, start counting on the day after you received title or, if earlier, the day after you took possession and assumed the burdens and privileges of ownership. Taking possession under an option agreement is not enough; the holding period cannot start until there is an actual contract of sale, and the seller’s period cannot end before then. For stocks and bonds bought on a securities market, the publication’s table starts the period the day after the trade date and ends it on the trade date you sell.

Special rules that change the answer

Inherited property is deemed held longer than 1 year no matter how long you held it. Patent property is likewise treated as held longer than 1 year. If you receive a gift and your basis comes from the donor’s basis, your holding period includes the donor’s; if your basis is the fair market value, it starts the day after the gift. When you acquire an asset in a nontaxable exchange and your basis comes in whole or part from the old property, the new property’s holding period includes the old property’s, so it begins the same day. For an installment sale, the gain keeps the character it had in the year of sale in later years. Nonbusiness bad debts are short-term capital losses.

Worked example

You buy shares on March 10, 2025 and sell on March 10, 2026. Counting begins March 11, 2025, and March 10, 2026 is the last day of the first year, so the holding period is not longer than 1 year and the gain is short term. Selling on March 11, 2026 makes it long term. If you then sell at a $4,000 gain, whether it is reported in Part I or Part II changes how it combines with other results. A day can decide which part of the form the gain lands in, so check the trade date rather than the settlement date shown on a statement when the publication’s market rule applies.

Short-term and long-term netting

The publication has you net the groups separately. Add your short-term gains, add your short-term losses, and subtract the smaller total from the larger for the net short-term result. Do the same for long-term, including capital gain distributions from mutual funds and REITs and any long-term loss carryover. If losses exceed gains overall, the yearly capital loss deduction is limited to $3,000, or $1,500 if you are married filing separately. A carried-over loss keeps its character, and short-term losses are used first against the deduction limit.

Mistakes to avoid

People miscount by starting on the purchase date, treat the anniversary date as already long term, or forget that a gift or an exchange can carry in an earlier start date. Also check Form 1099-B, box 2, which the publication says may help you determine whether a gain or loss is short or long term. Because acquisition dates can be hard to prove for older assets, keep purchase confirmations and closing statements with your records and review unusual cases with a tax professional.

Related Publication 544 topics

More from the same IRS publication: Is gain on a capital asset sale taxable?, What is a like-kind exchange?, What is Section 1231 property?. Related tools on this site: capital gains tax calculator, capital gains tax rate calculator.

Sources

• IRS Publication 544, Sales and Other Dispositions of Assets (2025): sections “Long and Short Term”, “Holding period”, “Table 4-1”, “Table 4-2”, “Treatment of Capital Losses”, “Capital Gains Tax Rates”. Read November 2, 2026.

Edition read: Publication 544 (2025), for use in preparing 2025 returns. Dollar limits and rates in this publication are for 2025; the publication notes that later legislation (P.L. 119-21) may affect federal rules, so check the current publication and form instructions for your tax year. This page summarizes the publication and does not replace it. Marked for human review.