What you pay on long-term capital gains depends on your income level
Long-term capital gains — profits from selling an investment you held for more than one year — are taxed at lower rates than ordinary income. The rate you pay is 0%, 15%, or 20%, determined by your total taxable income for the year, not by how much profit you made on the sale itself.
The IRS sets income thresholds each year, and they differ based on your filing status (single, married filing jointly, head of household, or married filing separately). Your gains are taxed at the lowest bracket first, then move to higher brackets only if your total income exceeds the threshold for that bracket.
This is different from short-term capital gains — profits from selling investments held one year or less — which are taxed as ordinary income at rates up to 37%. The distinction between long-term and short-term is purely about how long you owned the asset before selling it.
Key Takeaways
- Long-term capital gains rates are 0%, 15%, or 20%, determined by your total taxable income for the year, not the size of your gain.
- The income thresholds that determine which rate applies change each year and vary by filing status (single, married filing jointly, head of household, or married filing separately).
- Your long-term gains fill up the lowest bracket first, so you may pay 0% on some gains and 15% on others in the same year.
- You must hold an investment for more than one year for the gain to may have access to as long-term; selling after exactly one year still counts as short-term.
The three long-term capital gains brackets for 2024
For the 2024 tax year (filed in 2025), the income thresholds are:
| Filing Status | 0% Rate | 15% Rate | 20% Rate |
|---|---|---|---|
| Single | $0 to $47,025 | $47,025 to $518,900 | Over $518,900 |
| Married Filing Jointly | $0 to $94,050 | $94,050 to $583,750 | Over $583,750 |
| Head of Household | $0 to $62,975 | $62,975 to $551,350 | Over $551,350 |
| Married Filing Separately | $0 to $47,025 | $47,025 to $291,875 | Over $291,875 |
These thresholds adjust annually for inflation. The IRS publishes updated amounts in late 2024 for the 2025 tax year, so check the IRS website or your tax software before filing if you are reporting gains from a 2025 sale.
Your taxable income includes wages, interest, dividends, and other income sources, not just capital gains. If you earned $60,000 in wages and have $20,000 in long-term capital gains, your total taxable income is $80,000 for purposes of determining which bracket applies.
How the brackets stack when you have multiple gains
If you sold multiple investments in the same year, you add all the long-term gains together and then explore the brackets. The gains fill the brackets from bottom to top.
Example: You are single with $40,000 in wages and $30,000 in long-term capital gains. Your total taxable income is $70,000. The first $47,025 of your income (wages plus gains) is taxed at 0%, and the remaining $22,975 is taxed at 15%. So you pay 0% on $7,025 of your gains and 15% on the remaining $22,975.
If you have both long-term and short-term gains in the same year, you calculate them separately. Short-term gains are taxed as ordinary income first, then long-term gains are stacked on top. This can push your long-term gains into a higher bracket.
State and local taxes on capital gains
The federal long-term capital gains rate is only part of what you owe. Most states tax capital gains as ordinary income at their state income tax rate, which ranges from 0% (in states with no income tax) to over 13% in high-tax states.
A few states have special capital gains taxes separate from income tax. Washington and Illinois, for example, tax long-term capital gains at a flat rate (7% in Washington, 4.75% in Illinois) regardless of your income level. New York and California tax capital gains as ordinary income but at higher rates for high earners.
Your total tax bill on a long-term capital gain is the federal rate plus your state rate. If you live in a state with no income tax, you pay only the federal rate. If you live in California and are in the 20% federal bracket, you may pay 20% federal plus 13.3% state, totaling 33.3%.
Net Investment Income Tax and high earners
If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), you may also owe the Net Investment Income Tax, which is an additional 3.8% on capital gains and other investment income.
This tax applies only to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold. It is calculated separately from the regular capital gains tax and is reported on Form 8960.
Example: You are married filing jointly with $300,000 in modified adjusted gross income and $50,000 in long-term capital gains. Your income exceeds the $250,000 threshold by $50,000. You owe the 3.8% Net Investment Income Tax on the lesser of $50,000 (your gains) or $50,000 (the excess income), which is $1,900.
How holding period is calculated
The holding period starts the day after you buy an investment and ends the day you sell it. If you bought stock on January 15 and sold it on January 16 of the following year, you held it for more than one year and the gain is long-term.
The date matters for tax purposes. If you bought on January 15, 2024, and sold on January 15, 2025, you have not yet held it for more than one year — the gain is short-term. You must wait until January 16, 2025, to sell and may have access to for long-term treatment.
For mutual funds and ETFs, the holding period is based on when you purchased the shares, not when the fund itself was created. If you bought shares of a fund on March 1, 2024, and sold them on March 2, 2025, the gain is long-term, even if the fund has existed for decades.
Reporting long-term capital gains on your tax return
Long-term capital gains are reported on Schedule D (Capital Gains and Losses), which you attach to Form 1040. Your brokerage or investment company sends you Form 1099-B showing the sale price and holding period for each transaction.
You calculate the gain or loss by subtracting your cost basis (what you paid, plus commissions and fees) from the sale price. If you have both gains and losses, you net them together — losses reduce gains dollar-for-dollar. If losses exceed gains, you can deduct up to $3,000 of the net loss against ordinary income in that year, and carry forward any remaining loss to future years.
Tax software walks you through entering each transaction from your 1099-B. If you use a tax professional, bring your brokerage statements showing the purchase date, sale date, cost basis, and proceeds for each sale.
Frequently Asked Questions
Do I pay long-term capital gains tax if I sell at a loss?
No. If you sell an investment for less than you paid, you have a capital loss, not a gain. You do not owe tax on a loss. Instead, you can use the loss to reduce any capital gains you have that year, and if losses exceed gains, you can deduct up to $3,000 against ordinary income.
What if I inherited an investment — how is the holding period calculated?
Inherited investments receive a "step-up in basis," meaning your cost basis is the fair market value on the date of death, not what the original owner paid. You are treated as having held the investment long-term regardless of how long the deceased owner held it, so any gain is taxed at long-term rates.
Can I reduce my long-term capital gains tax by timing when I sell?
Yes, by managing which tax year you recognize the gain. If you are near a bracket threshold, selling in a year when your other income is lower may keep you in a lower bracket. You can also harvest losses in one year to offset gains in another, though the wash-sale rule prevents you from buying back the same investment within 30 days.
Are dividends from stocks taxed as long-term capital gains?
may have access to dividends are taxed at long-term capital gains rates if you held the stock for more than 60 days around the dividend payment date. Non-may have access to dividends are taxed as ordinary income. Your 1099-DIV shows which dividends are may have access to.
Do I owe long-term capital gains tax on cryptocurrency?
Yes. The IRS treats cryptocurrency as property, not currency. When you sell or trade crypto for a profit, the gain is taxed as long-term capital gains if you held it for more than one year. You report it on Schedule D the same way you report stock gains.