When is a gain or loss considered short-term for tax purposes?

A gain or loss is considered short-term for tax purposes when the asset is held for less than one year. This definition is crucial for tax reporting and impacts the tax rate applied to the gain or loss. Typically, short-term capital gains are taxed at ordinary income rates, which can be higher than the long-term capital gains tax rates that apply to assets held for more than one year. Understanding this distinction is essential for investors, as it influences investment strategies and tax planning. Holding an asset for less than a year qualifies any gain or loss from the disposition of that asset as short-term, thereby subjecting it to the corresponding tax treatment.