Short-Term vs. Long-Term Capital Gains
The single biggest factor in how much tax you'll owe is how long you held the asset before selling.
- Short-term gains — assets held for one year or less — are taxed as ordinary income, using the same brackets as your salary (10%–37%).
- Long-term gains — assets held for more than one year — qualify for preferential rates of 0%, 15%, or 20%, depending on your income.
Holding an investment just one day past the one-year mark can mean a dramatically lower tax bill.
2025 Long-Term Capital Gains Tax Rates
| Rate | Single | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 0% | Up to $48,350 | Up to $96,700 | Up to $64,750 |
| 15% | $48,351–$533,400 | $96,701–$600,050 | $64,751–$566,700 |
| 20% | Over $533,400 | Over $600,050 | Over $566,700 |
2026 Long-Term Capital Gains Tax Rates
| Rate | Single | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 | Up to $66,200 |
| 15% | $49,451–$545,500 | $98,901–$613,700 | $66,201–$579,600 |
| 20% | Over $545,500 | Over $613,700 | Over $579,600 |
The Net Investment Income Tax (NIIT)
High-income earners may owe an additional 3.8% Net Investment Income Tax on top of the standard capital gains rate. This applies to the lesser of your net investment income or the amount your modified adjusted gross income exceeds:
- $200,000 for single filers
- $250,000 for married filing jointly
- $125,000 for married filing separately
The calculator flags when NIIT may apply based on your inputs.
How to Reduce Capital Gains Tax
- Hold longer than one year to qualify for long-term rates.
- Tax-loss harvesting: Offset gains by selling other investments at a loss.
- Use tax-advantaged accounts: Gains inside a 401(k) or IRA are sheltered from capital gains tax.
- Donate appreciated assets to charity — you avoid the gain and get a deduction.
- Time the sale to a year when your income is lower, potentially dropping you into a 0% bracket.
Frequently Asked Questions
What is the capital gains tax rate for 2025?
Long-term rates are 0%, 15%, or 20% depending on your taxable income and filing status. Short-term gains are taxed at ordinary income rates of 10%–37%.
Do I owe capital gains tax if I lost money?
No. Capital losses can actually offset capital gains dollar-for-dollar. If your losses exceed your gains, you can deduct up to $3,000 per year against ordinary income, with excess losses carried forward to future years.
Are capital gains taxed twice?
In a sense, yes — corporate earnings are taxed at the corporate level, and when shareholders sell stock, they pay capital gains tax on the appreciation. This "double taxation" is a common criticism of the current system, which is partly why long-term rates are lower than ordinary income rates.
Does my state tax capital gains?
Most states tax capital gains as ordinary income. Some states with no broad income tax — including Florida, Texas, and Nevada — also have no state capital gains tax. However, rules vary: Washington state has no income tax but does levy a 7% capital gains tax on long-term gains above an inflation-adjusted threshold (approximately $262,000). Always verify your state's rules before filing. This calculator covers federal taxes only.