Securities

Securities traders have ordinary tax rates on short-term capital gains, wash-sale loss adjustments, capital-loss limitations, and accounting challenges.

Securities Include

U.S. and international equities (stocks)
U.S. and foreign equity (stock) options
Narrow-based indexes (an index made up of nine or fewer securities)
Options on narrow-based indexes
Securities ETFs structured as registered investment companies (RIC)
Options on securities ETF RICs
Commodities ETFs structured as publicly traded partnerships (PTP)
Volatility ETNs structured as debt instruments
Bonds
Mutual funds

The IRS taxes securities transactions when a taxpayer closes an open trade — hence the term “realization method.” Taxpayers can defer capital gains by holding open securities positions at year-end. With “tax-loss harvesting,” investors sell to realize losses before year-end 2024. Do not re-enter those positions within 30 days; otherwise, the planned loss might defer to 2026 as a wash-sale loss adjustment. Wash sales during the year can be okay, providing you close them out before year-end.

Short-term capital gains (STCG) are taxed at ordinary tax rates, with progressive tax brackets currently up to 37% for 2025 and 2026. Long-term capital gains (LTCG) rates are significantly lower and apply to sales of securities held for 12 months or more. The LTCG rates are 0% for the 10% and 12% ordinary brackets, 15% in the middle brackets, and 20% in the top 37% bracket.

If you would like more information, you can see Green’s Trader Tax Guide, Chapter 3, Tax Treatment of Financial Products.