Long-term capital gains tax rates depend on your total income, not just the gain itself
The federal tax rate on long-term capital gains is 0%, 15%, or 20%, depending on how much total income you report that year. You do not pay a flat rate on the gain alone. The IRS brackets for 2024 are: 0% if your income falls below a certain threshold, 15% for income in the middle range, and 20% for the highest earners. These thresholds change every year and differ based on whether you file as single, married filing jointly, head of household, or another status.
A long-term capital gain is a profit from selling an asset you owned for more than one year. This includes stocks, rental property, land, or a business interest. If you sell something you owned for one year or less, the gain is short-term and taxed as ordinary income at your regular tax rate, which is usually higher.
Your state may also tax capital gains. Some states charge no capital gains tax at all. Others tax capital gains as ordinary income. A few states, including California, New York, and Washington, have separate capital gains taxes on top of income tax. The amount varies by state and changes year to year.
Key Takeaways
- Federal long-term capital gains tax is 0%, 15%, or 20% based on your total income for the year, not the size of the gain.
- You must own an asset for more than one year for the gain to may have access to as long-term; gains on assets held one year or less are taxed as ordinary income.
- Your filing status (single, married filing jointly, head of household) determines the income thresholds that place you in each tax bracket.
- State capital gains taxes vary widely: some states do not tax capital gains, others tax them as ordinary income, and some charge a separate capital gains tax.
- The income thresholds for each federal bracket change annually, so you need to check the current year's numbers when you file.
How the 0%, 15%, and 20% brackets work
The IRS does not explore one rate to your entire capital gain. Instead, your capital gain fills up the brackets in order. If you have room left in the 0% bracket, your gain sits there first. Once that space is full, the next portion of your gain moves into the 15% bracket. Only gains above that threshold are taxed at 20%.
For example, if you file as single in 2024 and your taxable income before the capital gain is $30,000, you have room in the 0% bracket up to $47,025. If your long-term capital gain is $10,000, the entire gain falls in the 0% bracket and you owe no federal tax on it. If your gain is $20,000, the first $17,025 is taxed at 0% and the remaining $2,975 is taxed at 15%.
The thresholds are higher for married couples filing jointly and lower for single filers. Head of household filers have their own thresholds, which fall between single and married filing jointly. The IRS publishes updated brackets each year in late 2023 for the following tax year.
2024 federal long-term capital gains brackets
| Filing Status | 0% Bracket | 15% Bracket | 20% Bracket |
|---|---|---|---|
| Single | Up to $47,025 | $47,026 to $518,900 | $518,901+ |
| Married Filing Jointly | Up to $94,050 | $94,051 to $583,750 | $583,751+ |
| Head of Household | Up to $63,000 | $63,001 to $551,350 | $551,351+ |
| Married Filing Separately | Up to $47,025 | $47,026 to $291,875 | $291,876+ |
These numbers are for the 2024 tax year, which you report in April 2025. The 2025 brackets will be slightly higher due to inflation adjustment. You can find the current year's brackets on the IRS website or in the instructions to Form 1040.
How to calculate what you owe
Start by finding your taxable income before you add the capital gain. This is your income after deductions and exemptions. Then add your long-term capital gain to that number. Look up the bracket thresholds for your filing status and the current tax year. Determine which portion of your gain falls into each bracket, multiply by the rate, and add the results.
If you have both long-term and short-term capital gains, the short-term gains are taxed first as ordinary income. Long-term gains fill the brackets after that. If you have capital losses, they reduce your gains dollar-for-dollar. If losses exceed gains, you can deduct up to $3,000 of the excess loss against ordinary income in that year. Any remaining loss carries forward to future years.
Many tax software programs calculate this automatically once you enter the sale price, purchase price, and date of purchase. If you use a tax professional, they will handle the calculation. If you file by hand, the IRS Worksheet for Schedule D (Form 1040) walks you through the steps.
State capital gains taxes
Nine states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not capital gains). If you live in one of these states, you owe no state capital gains tax.
Most other states tax capital gains as ordinary income, meaning they explore your state income tax rate to the gain. A few states have a separate capital gains tax. Washington charges a 7% tax on long-term capital gains over $250,000. California taxes capital gains as ordinary income but at rates that can reach 13.3% for high earners. New York has an ordinary income tax that applies to capital gains, with top rates around 10.9%.
If you moved to a new state during the year you sold the asset, you may owe tax to both states. The state where you lived when you sold it usually has the primary claim. Some states offer credits for taxes paid to other states, but the rules vary. A tax professional in your state can tell you what you owe.
Net Investment Income Tax
If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), you may also owe a 3.8% Net Investment Income Tax on top of the federal capital gains tax. This is a separate tax that applies to investment income, including capital gains, dividends, and interest.
The Net Investment Income Tax is calculated on the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold. For example, if you are single with modified adjusted gross income of $220,000 and net investment income of $50,000, the tax applies to $20,000 (the excess over $200,000). You would owe 3.8% of $20,000, or $760.
This tax is reported on Form 8960 and attached to your Form 1040. If you use tax software or a tax professional, it is usually calculated automatically.
Reporting capital gains on your tax return
Long-term capital gains are reported on Schedule D (Form 1040), which you attach to your Form 1040. You will need the purchase date, sale date, purchase price, and sale price for each asset. If you sold shares of stock or a mutual fund, your broker sends you a Form 1099-B showing the sale details. If you sold real property, you may not receive a form, so you need to gather the information yourself.
Enter each sale on Schedule D, Part II (for long-term gains). The form calculates your total long-term capital gain or loss. If you have short-term gains or losses, they go in Part I. The form then combines both sections and produces a net capital gain or loss that transfers to Form 1040.
If you sold a primary residence, you may be able to exclude up to $250,000 of the gain (or $500,000 if married filing jointly) if you meet the ownership and use tests. This exclusion is claimed on Form 8949 and Schedule D, not on a separate form. The instructions to Schedule D explain the rules and where to report the exclusion.
Frequently Asked Questions
Do I have to pay capital gains tax if I reinvest the money?
Yes. The tax is based on the gain itself, not on what you do with the proceeds. If you sell a stock for $10,000 that you bought for $6,000, you owe tax on the $4,000 gain whether you spend the money, hold it in cash, or buy another stock. Reinvesting does not defer or eliminate the tax.
What if I sold an asset at a loss?
Capital losses reduce capital gains dollar-for-dollar. If you have $5,000 in gains and $3,000 in losses, your net gain is $2,000 and you are taxed on that amount. If losses exceed gains, you can deduct up to $3,000 of the excess against wages, salary, and other ordinary income. Any remaining loss carries forward to future years.
How do I know my holding period — is it one year from the purchase date?
The holding period starts the day after you buy the asset and ends on the day you sell it. If you bought on January 15, 2023, and sold on January 15, 2024, you owned it for exactly one year, and the gain is short-term. You must own it until January 16, 2024, for the gain to be long-term. Your broker's records show the exact dates.
Can I reduce my capital gains tax by donating the stock to charity instead of selling it?
Yes. If you donate appreciated stock directly to a may have access to charity, you avoid the capital gains tax entirely and receive a charitable deduction for the full fair market value of the stock. You cannot do this if you sell the stock first and then donate the proceeds — the tax is owed at the moment of sale. Your charity and tax professional can explain the process.
What if I inherited an asset — do I owe capital gains tax when I sell it?
Inherited assets receive a "step-up in basis," meaning the tax basis becomes the fair market value on the date of death. If you inherit stock worth $50,000 and sell it for $52,000 a month later, your gain is only $2,000, not the gain the deceased person would have owed. This applies to most inherited assets, though some exceptions exist. Your tax professional can explain how this works for your specific situation.