How does my holding period decide whether a gain is short-term or long-term?

The clock starts the day after you buy and runs through the day you sell. If you've held more than one year (a year and a day or longer), the gain is long-term and taxed at the favorable 0%/15%/20% rates. Hold one year or less and it's short-term, taxed as ordinary income at your regular bracket, which can be much higher. The IRS looks at the trade date, not the settlement date. For inherited assets, the holding period is automatically long-term regardless of how long you personally held them. For gifted assets, you generally inherit the giver's original purchase date. Missing the long-term mark by even a day can cost thousands, so check the purchase date before selling a winner.