Question 1

How is capital-gains tax calculated?

Accepted Answer

Capital-gains tax is the applicable rate multiplied by the taxable gain: your realized gains after realized losses have been set against them, not each winning position on its own. $$ \begin{gathered} {\text{taxable gain}} = {\text{realized gains}} - {\text{losses set against them}} \[6pt] \text{tax} = {\text{applicable rate}} \times {\text{taxable gain}} \end{gathered} $$ where: what is left of the year's gains once losses are set against them — never below zero the profits locked in by positions closed during the year the year's realized losses, plus losses carried forward from earlier years the short-term or the long-term rate, chosen by your residency and how long the position was held The tax is the rate times what remains of the gains once losses are taken off. A strategy that closed one position for +1,000 and another for −400 in the same year is taxed on 600, not on 1,000; a year whose losses exceed its gains is taxed on zero and carries the remainder forward — never a negative tax. Reading the rate against gross gains overstates the drag taxes put on a strategy, most of all one that trades a lot.

Question 2

How does Fincanva handle it?

Accepted Answer

The rates are percentages of the gain, seeded from your tax residency and labelled "Short-term capital gains" and "Long-term capital gains"; for Italian residency they are set by law for the selected tax regime and shown as "Auto-updated". Set the tax rules your backtests use is where you change them. Tax is charged only on realized gains, at the full applicable rate, and only when Taxes is on in your simulation assumptions — which also sets aside, in each day's value, the tax still-open gains would owe if sold that day. When the tax leaves the account follows the tax regime: once a year, on the year's net result, under United States, Other and the Italian Declarative regime; as each gain is realized under the Italian Administered regime.

Question 3

How long must a position be held to count as long-term?

Accepted Answer

More than one year — more than 365 days between opening and closing the position. A position held for exactly 365 days is still short-term; it has to pass the threshold, not merely reach it. The clock starts when the position is first opened. Buying more of an instrument you already hold does not restart it, and selling part of a position is measured from that same first purchase — the clock only resets once the position has been closed completely. The threshold only changes the rate under the residencies that have two rates, United States and Other. Under Italy a single rate applies however long the position was held.

Question 4

What happens to a realized loss?

Accepted Answer

A realized loss reduces the gains you are taxed on, and the part you cannot use this year carries forward. How long it stays usable, and against what, depends on your residency:

United States and Other — the loss carries forward with no time limit and keeps its short-term or long-term character.
Italy — the loss stays usable for five years, counted according to the tax regime; with a single rate there is no character to keep, and a gain on an ETF cannot be reduced by any loss, while a loss on an ETF can reduce other gains.

The full rules for each residency, and what the Italian ETF rule does to a strategy built mainly of ETFs, are in Set the tax rules your backtests use.

Question 5

What does it look like in practice?

Accepted Answer

A strategy closes two positions in the same year: one for a 1,000 gain, held eighteen months, and one for a 400 loss.

Under United States residency the loss is set against the gain first, so the taxable gain is 1,000 − 400 = 600. The winner was held more than a year, so it meets the 20% long-term rate: 20% × 600 = 120 of tax. Close the same winner at eleven months and the netting is unchanged, but the gain is short-term and meets the 35% rate: 35% × 600 = 210 of tax — 90 more, on the same pair of trades.

Give the strategy a 1,400 loss, on a briefly held position, instead of a 400 one. Losses exceed gains, so the tax is 0, and the unused 400 carries forward as a short-term loss, available against short-term gains in any later year of the run.

Under Italy residency, on the default Declarative regime, the single 26% rate applies whatever the holding period: 26% × 600 = 156 of tax. If the winner was an ETF, its gain cannot be offset, so the whole 1,000 is taxed: 26% × 1,000 = 260 of tax, while the 400 loss stays available against the strategy's non-ETF gains.