Insider’s experts choose the best products and services to help make smart decisions with your money (here’s how). In some cases, we receive a commission from our our partners, however, our opinions are our own. Terms apply to offers listed on this page.
Long-term capital gains are taxed at 15% or 20%.
Westend61/Getty
Your capital gains tax rate depends on your income and how long you hold an asset before selling it.
Short-term capital gains are taxed as ordinary income in accordance with your federal tax bracket.
Long-term capital gains are usually taxed at 0%, 15%, or 20%, but can get as high as 25% or 28%.
See Personal Finance Insider’s picks for best tax software »
If you earn money from the sale of a capital asset — your home, part of a business, stocks, or bonds, for example — that profit may be subject to capital gains tax.
There are two categories of capital gains: short term (assets held for a year or less) and long term (assets held for longer than one year). The day you acquire the asset isn’t included in your holding period, but the day you sell it is.
Any net gain resulting from the sale of an asset with a short-term holding period will be added to your gross income and taxed as ordinary income at rates between 10% and 37%. Net gains considered long term are taxed at 0%, 15% or 20% depending on your total taxable income.
How much is capital gains tax?
The capital gains tax is generally favorable; you’ll never pay a higher tax than what you would pay on your ordinary income. The short-term capital gains tax rates are the same as what you pay on your wages.
Long-term capital gains rates range from 0% to 20% for 2021 and 2022, except in special circumstances. Capital gains resulting from the sale of collectibles held long term, like fine art or a coin collection, are taxed at the highest rate: 28%. Certain gains from real estate can be taxed at 25%.
Quick tip: The current long-term capital gains rates, with the exception of the highest rates for collectibles and real estate, have been in place since 2013. The income thresholds to which those rates are applied are adjusted every year for inflation.
Here are the federal long-term capital gains income brackets for 2022:
Tax rate
Taxable income: Single filer
Taxable income: Head of household
Taxable income: Married filing jointly
Married filing separately
0%
$41,675 or less
$55,800 or less
$83,350 or less
$41,675 or less
15%
$41,676-$459,750
$55,801-$488,500
$83,351-$517,200
$41,676-$258,600
20%
$459,751 or more
$488,501 or more
$517,201 or more
$258,601 or more
Note: Taxable income is your income after all deductions are taken.
Here are the federal long-term capital gains income brackets for 2023:
Tax rate
Taxable income: Single filer
Taxable income: Head of household
Taxable income: Married filing jointly
Married filing separately
0%
$44,625 or less
$59,750 or less
$89,8250 or less
$44,625 or less
15%
$44,626-$492,300
$59,751-$523,050
$89,251-$553,850
$44,626-$276,900
20%
$492,301 or more
$523,051 or more
$553,851 or more
$276,901 or more
Here are the federal short-term capital gains rates for 2022, which are the same as your ordinary income rates:
Tax rate
Taxable income: Single filer
Taxable income: Head of household
Taxable income: Married filing jointly
Married filing separately
10%
$10,275 or less
$14,650 or less
$20,550 or less
$10,275 or less
12%
$10,276-41,775
$14,651-$55,900
$20,551-$83,550
$10,276-41,775
22%
$41,776-$89,075
$55,901-$89,050
$83,551-$178,150
$41,776-$89,075
24%
$89,076-$170,050
$89,051-$170,050
$178,151-$340,100
$89,076-$170,050
32%
$170,051-$215,950
$170,051-$215,950
$340,101-$431,900
$170,051-$215,950
35%
$215,951-$539,900
$215,951-$539,900
$431,901-$647,850
$215,951-$323,925
37%
$539,901 or more
$539,901 or more
$647,851 or more
$323,926 or more
Here are the federal short-term capital gains rates for 2023:
Tax rate
Taxable income: Single filer
Taxable income: Head of household
Taxable income: Married filing jointly
Married filing separately
10%
$11,000 or less
$15,700 or less
$22,000 or less
$11,000 or less
12%
$11,001-$44,725
$15,701-$59,850
$22,001-$89,450
$11,001-$44,725
22%
$44,726-$95,375
$59,851-$95,350
$89,451-$190,750
$44,726-$95,375
24%
$95,376-$182,100
$95,351-$182,100
$190,751-$364,200
$95,376-$182,100
32%
$182,101-$231,250
$182,101-$231,250
$364,201-$462,500
$182,101-$231,250
35%
$231,251-$578,125
$231,251-$578,100
$462,501-$693,750
$231,251-$346,875
37%
$578,126 or more
$578,101 or more
$693,751 or more
$346,876 or more
How do you calculate capital gains?
Every capital asset you own has a basis, which is generally the amount you paid for the property initially, plus any taxes or commissions. If you received the asset as a gift or from inheritance, there’s a special calculation for figuring out your adjusted tax basis.
To calculate the amount of gain (or loss), simply subtract the proceeds received on the date of the sale from your adjusted tax basis. If the proceeds are more than your basis, you’ll generate a gain. If the proceeds are less than your basis, you’ll generate a loss.
The capital gains tax rates apply to your net capital gains. If you had capital losses during the tax year (or from a previous year that you carried over), you may be able to use it to offset your gains.
Example of how capital gains taxes work
For example, let’s say you had a $2,000 capital loss from the sale of a stock you held for 18 months — that’s a long-term capital loss. And you also had $3,000 in capital gain from the sale of another stock you held for 24 months.
Since both assets were held long-term, you can net them against each other: $3,000 gain – $2,000 loss = $1,000 net gain taxed at long-term capital gains rates.
Say your taxable income for 2022 was $50,000 and you file your tax return as single. Your capital gains will be taxed at 15%, unless the asset is a collectible or real estate.
How do I pay capital gains taxes?
If you sold an asset that generated a large capital gain, you may be required to pay estimated quarterly taxes. You can complete a short questionnaire on the IRS website to figure out how to pay your capital gains tax.
Your net gains and losses for the year are calculated on Form 8949. You won’t have to do the math yourself if you use tax software. From there, report any capital gains or losses on Schedule D of Form 1040 (your tax return).
What is the Net Investment Income Tax?
If your modified Adjusted Gross Income (AGI) is higher than $150,000 you may have to pay an additional tax that goes toward supporting America’s healthcare program.
The Net Investment Income Tax applies a flat rate of 3.8% to your investment income if your modified adjusted gross income (AGI) is above the following amounts for your filing status:
Married filing jointly and qualifying widow(er): $250,000 or moreMarried filing separately: $125,000 or moreSingle and head of household: $200,000 or more
Holding an investment for longer than 12 months generally means you’ll owe less in taxes than if you bought and sold the asset within one year.
The vast majority of investors will be taxed at 15% on their long-term capital gains at the federal level. Most states tax capital gains as ordinary income, regardless of whether they are long-term or short-term. Strategically selling investments at a loss can lower the gain you’re taxed on, since the two are netted.