Understanding capital gains tax is crucial for anyone who invests in stocks, real estate, or other assets. The amount you pay depends on how long you’ve held the asset and your income level. Here’s everything you need to know about capital gains tax rates for 2024 and 2025.
What Are Capital Gains?
Capital gains represent the profit you make when selling an asset for more than its original purchase price. This includes stocks, bonds, real estate, cryptocurrency, and even collectibles like art or precious metals. When you sell an asset for less than you paid, that’s called a capital loss.
The key distinction in capital gains taxation is the holding period, which determines whether your gains are classified as short-term or long-term.
Short-Term vs. Long-Term Capital Gains
Short-term capital gains apply to assets held for one year or less. These gains are taxed as ordinary income at regular federal income tax rates, which range from 10% to 37% depending on your income bracket.
Long-term capital gains apply to assets held for more than one year. These receive preferential tax treatment with rates of 0%, 15%, or 20%, significantly lower than ordinary income tax rates for most taxpayers.
2024 Long-Term Capital Gains Tax Rates
For assets sold in 2024 (reported on 2025 tax returns), the long-term capital gains tax rates are:
| Tax Rate | Single Filers | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | $0 – $47,025 | $0 – $94,050 | $0 – $47,025 | $0 – $63,000 |
| 15% | $47,026 – $518,900 | $94,051 – $583,750 | $47,026 – $291,850 | $63,001 – $551,350 |
| 20% | $518,901+ | $583,751+ | $291,851+ | $551,351+ |
2025 Long-Term Capital Gains Tax Rates
For assets sold in 2025 (reported on 2026 tax returns), the rates are adjusted for inflation:
| Tax Rate | Single Filers | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | $0 – $48,350 | $0 – $96,700 | $0 – $48,350 | $0 – $64,750 |
| 15% | $48,351 – $533,400 | $96,701 – $600,050 | $48,351 – $300,000 | $64,751 – $566,700 |
| 20% | $533,401+ | $600,051+ | $300,001+ | $566,701+ |
Short-Term Capital Gains Tax Rates
Short-term capital gains are taxed at ordinary income tax rates for both 2024 and 2025:
- 10%, 12%, 22%, 24%, 32%, 35%, and 37%
The exact rate depends on your total taxable income and filing status, following the same brackets as regular income tax.
Special Considerations
Net Investment Income Tax (NIIT)
High-income earners may face an additional 3.8% Net Investment Income Tax on capital gains. This applies when modified adjusted gross income exceeds:
- $200,000 for single filers
- $250,000 for married filing jointly
- $125,000 for married filing separately
Collectibles
Long-term capital gains on collectibles (art, antiques, coins, precious metals) are taxed at a maximum rate of 28%, regardless of your income level.
Tax-Advantaged Accounts
Assets held in retirement accounts (401(k), IRA, Roth IRA) or 529 education savings plans are not subject to capital gains tax while held within these accounts.
Strategies to Minimize Capital Gains Tax
Hold Assets Longer: The most straightforward strategy is holding investments for more than one year to qualify for preferential long-term rates.
Use Tax-Advantaged Accounts: Maximize contributions to 401(k)s, IRAs, and other tax-sheltered accounts before investing in taxable accounts.
Tax-Loss Harvesting: Strategically sell losing investments to offset gains. You can offset gains dollar-for-dollar and use up to $3,000 in excess losses to reduce ordinary income annually.
Home Sale Exclusion: When selling your primary residence, you may exclude up to $250,000 in gains (single) or $500,000 (married filing jointly) if you’ve lived in the home for at least two of the past five years.
Key Takeaways
The difference between short-term and long-term capital gains taxation is substantial. For most investors, long-term capital gains rates of 0% or 15% are significantly more favorable than short-term rates that can reach 37%.
According to the IRS, most taxpayers pay no more than 15% on long-term capital gains, making the strategy of holding investments for over a year particularly valuable for tax planning.
Understanding these rates and planning accordingly can result in significant tax savings over time, making it essential knowledge for any serious investor.