For tax purposes, how long must a security be held to qualify for long-term capital gains treatment?

To qualify for long-term capital gains treatment, a security must be held for more than one year. This timeframe is significant because it differentiates between short-term and long-term capital gains, with long-term gains typically taxed at a lower rate than short-term gains. The one-year holding period encourages long-term investment strategies, as investors are incentivized by the potential tax advantages of long-term capital appreciation.

Short-term capital gains, on the other hand, applies to securities that are held for one year or less, and these gains are taxed at the individual's ordinary income tax rate, which is usually higher than the capital gains tax rate. Therefore, holding securities for longer than one year allows investors to benefit from the favorable tax treatment associated with long-term capital gains.