Mouse Trap: Watch Out for Short-Term Capital Gains
Since 2023, short-term capital gains can trigger progressive taxation—smart timing and structuring are key to avoiding surprise tax bills.
Mouse Trap: Watch Out for Short-Term Capital Gains!
Investors in Portugal, beware: since 2023, short-term capital gains can trigger a tax trap!
We all know that capital gains on the sale of shares, securities, or even the redemption/liquidation of investment funds are typically taxed at a flat 28% rate when earned at a private level.But here’s the catch: if you meet two conditions, your tax rate could suddenly jump!
Condition 1: The asset sold/redeemed was held for less than 1 year.
Condition 2: Your total taxable income (including these short gains) exceeds the top IRS threshold (€83,696 in 2024)💥 If both conditions apply, your short-term capital gains will be taxed at progressive rates of up to 53% instead of 28%.
What doesn’t count toward this threshold? If you’re earning NHR income from high-value work, pensions, or rental income, those amounts are taxed at a flat rate and won’t push you over the limit.But other income streams might.
Moral of the Story: If you're planning to cash out on short-term investments, think strategically. Holding for just one extra day past 12 months could save you from a tax spike. If you do short term trading, you might also to do it through derivative instruments, which for some reason are not caught by this mouse trap.
