Capital Gains: Tax Rates and Rules for 2024

If you own investments or regularly sell assets you own, it’s important to understand the potential tax implications

What is a capital gains tax?

Put simply, capital gains taxes are the taxes you pay on profits made from the sale of assets, such as stocks or real estate. How much you pay depends on what you sold, how long you owned it before selling, your taxable income and your filing status.

Generally speaking, holding onto an asset for more than a year before selling results in a more favorable tax rate of 0% to 20%, whereas assets sold within a year or less of ownership are subject to regular income tax rates, ranging from 10% to 37%.

• Capital gains taxes apply to assets that are “realized,” or sold. This means that the returns on stocks, bonds or other investments purchased through and then held within a brokerage are considered unrealized and not subject to capital gains tax.

• Assets held within tax-advantaged accounts — such as 401(ks) or IRAs — aren’t subject to capital gains taxes while they remain in the account. Instead, you may pay regular income taxes when it comes time to make a qualified withdrawal, depending on what type of account it is.

Most items people own are considered capital assets. This can include investments, such as stocks, bonds, cryptocurrency or real estate, as well as personal and tangible items, such as cars or boats.

When you sell a capital asset for a higher price than its original value, the money you make on that sale is called a capital gain. And when you sell an asset for less than its original value, the money you lose is known as a capital loss.

The difference between your capital gains and your capital losses is your net profit. For example, if you sold a stock for a $10,000 profit this year and sold another at a $4,000 loss, your net capital gain is $6,000.

How do capital gains taxes work?

Capital gains can be subject to either short-term tax rates or long-term tax rates. Short-term capital gains are treated as ordinary income and taxed according to ordinary income tax brackets. Long-term capital gains are taxed at 0%, 15%, or 20%.

• High-earning individuals may also need to account for the net investment income tax (NIIT), an additional 3.8% tax that can be triggered if your income exceeds a certain limit.

What is long-term capital gains tax?

Profits from the sale of an asset held for more than a year are subject to long-term capital gains tax. The rates are 0%, 15% or 20%, depending on taxable income and filing status. Per the IRS, most people pay no more than 15%

What is short-term capital gains tax?

Short-term capital gains tax is a tax on profits from the sale of an asset held for one year or less. Short-term capital gains are taxed according to your ordinary income tax bracket: 10%, 12%, 22%, 24%, 32%, 35% or 37%.

Capital gains tax rate 2024

In 2024, single filers with a taxable income of $47,025 or less, joint filers with a taxable income of $94,050 or less, and heads of households with a taxable income of $63,000 or less pay 0% on qualified realized long-term gains.

If your taxable income exceeds those amounts, you may be subject to 15% and 20% tax rates. Short-term capital gains held for a year or less are taxed at regular income tax rates.

The following rates and brackets apply to long-term capital gains sold in 2024 (reported on taxes filed in 2025).

Capital gains tax rate 2023

If you still need to file your 2023 tax return, see the long-term capital gains tax rates that apply to assets sold for a profit in 2023, which are reported on tax returns that were due April 15, 2024, or Oct. 15, 2024, with an extension.

Capital gains tax calculator

Use this capital gains calculator to estimate your taxes on assets sold in 2023 (taxes filed in 2024). This calculator is meant for general estimating purposes and does not take into account factors that may affect your total tax picture, such as standard or itemized deductions.

How to avoid or reduce capital gains taxes

Whenever possible, hold an asset for longer than a year so you can qualify for the long-term capital gains tax rate, because it’s significantly lower than the short-term capital gains rate for most assets. Our capital gains tax calculator shows how much that could save.

These include 401(k) plans, individual retirement accounts and 529 college savings accounts, in which the investments grow tax-free or tax-deferred. That means you don’t have to pay capital gains tax if you sell investments within these accounts. Roth IRAs and 529 accounts, in particular, have big tax advantages. If you follow the account rules, you can withdraw money from those accounts tax-free. With traditional IRAs and 401(k)s, your money grows tax-deferred, then you pay taxes when you take distributions in retirement.

Rather than reinvest dividends in the investment that paid them, rebalance by putting that money into your underperforming investments. Typically, you’d rebalance by selling securities that are doing well and putting that money into those that are underperforming. But using dividends to invest in underperforming assets will allow you to avoid selling strong performers — and thus avoid the capital gains that would come from that sale.

If you sold a house the previous year, you may be able to exclude a portion of the gains from that sale on your taxes. To qualify, you must have owned your home and used it as your main residence for at least two years in the five-year period before you sell it. You also must not have excluded another home from capital gains in the two-year period before the home sale. If you meet those rules, you can exclude up to $250,000 in gains from a home sale if you’re single, and up to $500,000 if you’re married filing jointly.

The IRS taxes your net capital gain, which is simply your total long- or short-term capital gains (investments sold for a profit) minus the corresponding long- or short-term total capital losses (investments sold at a loss). The strategic practice of selling off specific assets at a loss to offset gains is called tax-loss harvesting. This strategy has many rules and isn’t right for everyone, but it can help to reduce your taxes by lowering the amount of your taxable gains.

If your net capital loss exceeds your net capital gains, you can also offset your ordinary income by up to $3,000 ($1,500 for those married filing separately). Any additional losses can be carried forward to future years to offset capital gains or up to $3,000 of ordinary income per year.