Capital-gains tax is the tax charged on a realized gain — the profit you make when you sell a position for more than you paid for it. It applies only to gains you have actually locked in by closing a position, not to paper gains on holdings you still own. Fincanva can model it with two rates, a short-term and a long-term one chosen by how long the position was held, but whether that split exists at all is decided by your tax residency — Italy taxes a realized gain at one rate however long it was held.
How is capital-gains tax calculated?
Capital-gains tax is the applicable rate multiplied by the realized gain on the position.
where: the applicable rate is the short-term or the long-term rate, depending on your tax residency and on how long the position was held, and the realized gain is the profit locked in when the position was closed.
Where the residency has both, a position sold after only a brief holding period is taxed at the short-term rate and one held longer at the long-term rate. The app labels the two fields "Short-term capital gains" and "Long-term capital gains", and describes them as applying to gains on positions "held less than the long-term threshold" and "held past the long-term threshold".
Defaults in Fincanva
- The rates are percentages of the gain and are seeded from your tax residency, which is also what decides whether a short/long split exists at all — that page carries the per-residency table and says which fields you can still edit.
- Tax is charged only on realized gains, and only when taxes are switched on in your simulation assumptions; with taxes off it is zero.
- For Italian residency the rates are set by tax law for the selected tax regime and shown as "Auto-updated" rather than edited by hand.
Worked example
The same position realizes a 1,000 gain in two runs that differ only in how long it was held, under a United States residency (35% short-term, 20% long-term). Sold while the hold is still under the long-term threshold, the gain is short-term and carries 350 of tax; sold once the hold has passed that threshold, it is long-term and carries 200.
Run the same pair under an Italy residency and the two answers converge: a single 26% rate applies either way, so both holds carry 260. Holding period moves the rate only where the residency draws that line.
These figures describe what Fincanva models in a simulation, not tax advice for your own situation — see Is this financial advice?.
Where this term is used
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Fincanva provides no financial advice. Backtests show what would have happened — not what will.
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