The tax rate depends on how long you held the asset and your income level

The amount of tax you owe on capital gains is not the same for everyone. The IRS taxes capital gains at different rates based on two things: how long you owned the asset before selling it and your total taxable income for the year. If you held the asset for more than one year, you pay the long-term capital gains rate. If you sold it within one year, you pay the short-term rate — which is the same as your ordinary income tax rate.

Long-term capital gains rates are lower than short-term rates. For 2024, the long-term rates are 0%, 15%, or 20%, depending on your income bracket. Short-term gains are taxed as ordinary income, which ranges from 10% to 37%. Your filing status (single, married filing jointly, head of household) determines which income bracket you fall into.

Key Takeaways

  • Long-term capital gains — assets held over one year — are taxed at 0%, 15%, or 20% based on your income level and filing status.
  • Short-term capital gains — assets sold within one year — are taxed at your ordinary income tax rate, which can be as high as 37%.
  • Your total taxable income for the year, not just the gain amount, determines which tax bracket applies to your capital gains.
  • Some states also tax capital gains, and the state rate is added on top of the federal rate.

Long-term capital gains rates for 2024

If you held an asset for more than one year before selling it, you may have access to for the long-term capital gains rate. The rate you pay depends on your filing status and your total taxable income. For single filers in 2024, the 0% rate applies to gains up to $47,025. The 15% rate applies to gains between $47,025 and $518,900. Gains above $518,900 are taxed at 20%.

For married couples filing jointly, the income thresholds are higher. The 0% rate applies to gains up to $94,050. The 15% rate covers gains from $94,050 to $583,750. Gains above $583,750 are taxed at 20%. Head of household filers have different thresholds again. These numbers change each year based on inflation, so the ranges for 2025 will be slightly different.

The key point: your income level determines your rate. If you are in the 0% bracket, you owe no federal tax on long-term gains. If you are in the 15% bracket, you pay 15% on those gains. The rate does not depend on how much profit you made — it depends on where your total income lands for the year.

Short-term capital gains rates

Short-term capital gains are taxed as ordinary income. This means they are added to your wages, interest, and other income, and the combined total determines your tax rate. The ordinary income tax brackets for 2024 range from 10% to 37%, depending on filing status and total income.

Because short-term gains are taxed at higher rates than long-term gains, the timing of a sale matters. If you sell a stock at a $5,000 profit after holding it for 11 months, you pay short-term rates. If you wait one more month and sell at the same profit, you pay long-term rates — potentially saving hundreds of dollars in tax.

How state taxes add to your federal bill

Federal capital gains tax is only part of the picture. Most states also tax capital gains, and the state tax is added on top of the federal amount. State rates vary widely. Some states tax capital gains as ordinary income. Others have a separate capital gains tax rate. A few states do not tax capital gains at all.

For example, if you live in California and owe 15% federal tax on a long-term gain, you also owe California state tax on that same gain. California taxes capital gains as ordinary income, so your state rate depends on your income bracket there. In contrast, if you live in Texas, there is no state capital gains tax, so you owe only the federal amount.

Check your state's tax rules or speak with a tax professional to understand what your state charges. The difference between states can be significant — sometimes 5% to 13% or more.

How to calculate the tax you owe

Start by finding your total taxable income for the year, including wages, interest, dividends, and any other income. Then add your long-term capital gains to that total. Use the tax bracket table for your filing status to find which rate applies to your gains. Multiply the gain amount by that rate to find your federal tax.

For short-term gains, add them to your ordinary income first, then calculate tax on the combined total using the ordinary income brackets. This often pushes you into a higher bracket, which is why short-term gains cost more in tax.

Example: You are a single filer with $50,000 in wages. You sell a stock for a $20,000 long-term gain. Your total taxable income is $70,000. Using the 2024 brackets, your long-term gain falls partly in the 0% bracket (up to $47,025) and partly in the 15% bracket (from $47,025 to $518,900). You owe 0% on the first $47,025 of income and 15% on the remaining $22,975 of income. Your federal tax on the gain is $3,446.

Capital losses can reduce what you owe

If you sell an asset at a loss, you can use that loss to reduce your capital gains tax. If you have $10,000 in long-term gains and $3,000 in long-term losses, you owe tax on only $7,000 of gains. Losses and gains are matched by type — long-term losses offset long-term gains first, and short-term losses offset short-term gains first.

If your losses exceed your gains in a year, you can deduct up to $3,000 of the excess loss against your ordinary income. Any remaining loss carries forward to future years, where you can use it to offset future gains or ordinary income.

Frequently Asked Questions

Do I have to pay capital gains tax if I reinvest the money?

Yes. The tax is based on the profit you made, not on what you do with the money afterward. Whether you spend the proceeds, reinvest them, or leave them in a bank account, you owe the same tax on the gain.

What if I held the asset for exactly one year?

The holding period is measured from the purchase date to the sale date. If you buy on January 15 and sell on January 15 the next year, that is exactly one year, and you may have access to for long-term rates. If you sell on January 14, it is short-term.

Are capital gains taxed differently if I'm retired?

No. The tax rate is the same regardless of your employment status. However, your total taxable income for the year determines your bracket. If you are retired and have lower income, you may fall into a lower capital gains bracket than you did while working.

Do I owe capital gains tax on inherited assets?

Generally, no. Inherited assets receive a "step-up in basis," meaning the tax basis resets to the asset's value on the date of death. If you inherit a stock worth $50,000 and sell it for $50,000 a week later, you owe no capital gains tax. You only owe tax on gains that occur after you inherit.

What if I sell at a loss — do I get a refund?

No refund, but you can use the loss to reduce other gains or up to $3,000 of ordinary income in the same year. Unused losses carry forward indefinitely to future years.