7 — Net Short-Term Capital Gain or Loss Updated for tax year 2025

What this line means

The total of all short-term capital gains and losses from lines 1a through 6. This is your net short-term result before combining it with your long-term result on line 16. Short-term gains are taxed at your ordinary income tax rate — the same rate as your wages — which is almost always higher than the long-term capital gains rate.

Does this apply to you?

• You had any short-term capital transactions during the year (lines 1a through 6)
• This line is a calculation: add lines 1a through 6 together
• Everyone who files Schedule D completes this line

Easy to overlook

Short-term gains are taxed at ordinary rates, not capital gains rates The favorable long-term capital gains rates (0%, 15%, or 20%) only apply to assets held longer than one year. Short-term gains are taxed at your regular marginal rate, which can be as high as 37%. A $10,000 short-term gain costs significantly more in taxes than a $10,000 long-term gain. ¹ [SOURCE: General filing pattern — short-term vs long-term tax rate confusion]

Net short-term losses are combined with long-term gains If you have a net short-term loss and a net long-term gain, they are combined on line 16. This is mathematically unfavorable — the short-term loss reduces income that would have been taxed at the lower long-term rate. There is no way to avoid this netting. ² [SOURCE: IRS Schedule D instructions — Line 7]

Watch out for this

Mixing up the holding period and reporting long-term sales as short-term or vice versa. The one-year dividing line uses the trade date, not the settlement date. An asset purchased on March 1, 2024 and sold on March 1, 2025 is short-term. It needs to be sold on March 2, 2025 or later to be long-term. One day matters.

Related lines on your return

• Line 15 — Schedule D — Net long-term capital gain or loss (the long-term counterpart)
• Line 16 — Schedule D — Combines this line with line 15
• Line 7 — Form 1040 — Where the net capital gain or loss flows onto your return