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Taxes
Ashley Barnett
Ashley Barnett
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“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
Taylor Tepper
Taylor Tepper
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“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
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Published 8:00 a.m. UTC March 5, 2024
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Capital gains taxes are taxes owed on any profits made from selling assets for more than you paid for them. So, if you made money last year selling some high-performing assets, don’t count your wins just yet. The federal government will want its cut.
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What is the capital gains tax?
The capital gains tax is a type of tax you pay when selling a capital asset, such as real estate, stocks, bonds and collectables, such as coins and jewelry.
When you sell the asset, “the difference between what you paid and what it was sold for will be taxable to you, and reported on your tax return in the year the sale took place,” said Lawrence Sprung, a certified financial planner and founder of Mitlin Financial.
The tax rate you pay depends on your income, filing status and how long you owned the asset.
How does the capital gains tax work?
You owe capital gains taxes when you sell an asset for more than you paid for it. You don’t owe taxes as long as you own the asset. Taxes are only due when you sell it.
You can calculate the tax by taking the asset’s sale price and subtracting the original cost. If the sales price is higher than the purchase price, you’ve realized a capital gain.
For example, let’s say you buy a stock for $10 and sell it for $15. You’ve realized a capital gain of $5 and may owe capital gains tax on that $5.
You may sometimes sell an asset for less than you paid; in that case, you will have a capital loss. Net losses can offset your net gains for the year. This can help reduce your tax bill.
For instance, “if you have a $5,000 capital gain heading into the end of the year and have other assets that have a $5,000 loss, [then] selling those assets may allow you to bring your taxable capital gains to zero,” Sprung said.
What is long-term & short-term capital gains tax?
Capital gains fall into two main categories: short-term and long-term. The difference between the two is the length of time the asset was held.
Short-term capital gain. The profits you earn from selling assets you’ve held for less than a year. These are typically taxed at the same rate as your ordinary income, ranging from 10% to 37%.
Long-term capital gain. The profits you earn from selling assetsyou’ve held for over a year. Long-term capital gains tax rates are 0%, 15% or 20%, depending on your taxable income and filing status.
Capital gains tax rates for 2023
Here is the long-term capital gains tax rate for 2023:
| 2023 Long-Term Capital Gains Tax Rates | ||||||||
|---|---|---|---|---|---|---|---|---|
| Single | Head of household | Married filing jointly, surviving spouse | Married filing separately | |||||
| 0% tax rate | $0 – $44,625 | $0 – $59,750 | $0 – $89,250 | $0 – $44,625 | ||||
| 15% tax rate | $44,626 – $492,300 | $59,751 – $523,050 | $89,251 – $553,850 | $44,626 – $276,900 | ||||
| 20% tax rate | $492,301+ | $523,051+ | $553,851+ | $276,901+ | ||||
Short-term capital gains are taxed as ordinary income. Here are the tax rates for each filing status according to income for 2023:
| 2023 Short-Term Capital Gains Tax Rates | ||||||||
|---|---|---|---|---|---|---|---|---|
| Tax rate | Single | Married filing jointly, surviving spouse | Married filing separately | Head of household income range | ||||
| 10% | $0 – $11,000 | $0 – $22,000 | $0 – $11,000 | $0 – $15,700 | ||||
| 12% | $11,001 – $44,725 | $22,001 – $89,450 | $11,001 – $44,725 | $15,701 – $59,850 | ||||
| 22% | $44,726 – $95,375 | $89,451 – $190,750 | $44,726 – $95,375 | $59,851 – $95,350 | ||||
| 24% | $95,376 – $182,100 | $190,751 – $364,200 | $95,376 – $182,100 | $95,351 – $182,100 | ||||
| 32% | $182,101 – $231,250 | $364,201 – $462,500 | $182,101 – $231,250 | $182,101 – $231,250 | ||||
| 35% | $231,251 – $578,125 | $462,501 – $693,750 | $231,251 – $346,875 | $231,251 – $578,100 | ||||
| 37% | $578,126+ | $693,751+ | $346,876+ | $578,101+ | ||||
Capital gains tax rates for 2024
The IRS may adjust the capital gains tax rate each year. Here are the long-term tax rates for the 2024 tax year (for a return you’ll file in 2025):
| 2024 Long-Term Capital Gains Tax Rates | ||||||||
|---|---|---|---|---|---|---|---|---|
| Single | Married filing jointly, eligible surviving spouse | Married filing separately | Head of household | |||||
| 0% tax rate | $0 – $47,025 | $0 – $94,050 | $0 – $47,025 | $0 – $63,000 | ||||
| 15% tax rate | $47,026 – $518,900 | $94,051 – $583,750 | $47,026 – $291,850 | $63,001 – $551,350 | ||||
| 20% tax rate | $518,901+ | $583,751+ | $291,851+ | $551,351+ | ||||
And here are the short-term capital gains tax rates for 2024:
| 2024 Long-Term Capital Gains Tax Rates | ||||||||
|---|---|---|---|---|---|---|---|---|
| Tax rate | Single | Married filing jointly, eligible surviving spouses | Married filing separately | Head of household | ||||
| 10% | $0 – $11,600 | $0 – $23,200 | $0 – $11,600 | $0 – $16,550 | ||||
| 12% | $11,601 – $47,150 | $23,201 – $94,300 | $11,601 – $47,150 | $16,551 – $63,100 | ||||
| 22% | $47,151 – $100,525 | $94,301 – $201,050 | $47,151 – $100,525 | $63,101 – $100,500 | ||||
| 24% | $100,526 – $191,950 | $201,051 – $383,900 | $100,526 – $191,950 | $100,501 – $191,950 | ||||
| 32% | $191,951 – $243,725 | $383,901 – $487,450 | $191,951 – $243,725 | $191,951 – $243,700 | ||||
| 35% | $243,726 – $609,350 | $487,451 – $731,200 | $243,726 – $365,600 | $243,701 – $609,350 | ||||
| 37% | $609,351+ | $731,201+ | $365,601+ | $609,351+ | ||||
How to avoid, reduce or minimize the capital gains tax
There are several legitimate ways to reduce or minimize the capital gains tax you pay. But before trying these methods, consider speaking with a financial adviser to discuss your situation.
Consider holding your investments. If you hold off on selling your assets for at least one year and one day, you generally pay the long-term capital gains tax rate. The rate may be lower than what you pay on your ordinary income, so you owe less in taxes.
Try tax-loss harvesting. This strategy involves selling underperforming assets for less than what you paid. Then, “use those losses to balance out your wins, tax-wise,” said Taylor Kovar, a certified financial planner and founder of Kovar Wealth Management.
Sell in a down year. Consider selling assets when your other income in a particular year happens to be low. This will help you qualify for a lower bracket, and hence owe less in taxes.
Frequently asked questions (FAQs)
The long-term capital gains tax rates for 2024 are 0%, 15% and 20%. The short-term tax rates range from 0% to 37%.
If you sell your asset after owning it for more than a year, your tax rate will be 0%, 15% or 20%. The rate depends on your filing status and income level.
You can avoid the capital gains tax if your income and filing status allow you to pay a 0% tax rate on the investments you sell. Otherwise, you can reduce your tax bill with tax-loss harvesting, or holding onto your investments for more than a year.
Like other capital gains, the tax is based on the difference between the price you originally paid for the property and the price you sell the home for.
There are ways to lower your tax bill, though; for instance, you may be able to exclude up to $250,000 of that gain from your income (or up to $500,000 for married couples). You could also look into a 1031 exchange, where you buy a similar property with the money from the sale within a set time frame, often simultaneously.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
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Kim Porter is a writer and editor who's been creating personal finance content since 2010. Before transitioning to full-time freelance writing in 2018, Kim was the chief copy editor at Bankrate, a managing editor at Macmillan, and co-author of the personal finance book "Future Millionaires' Guidebook." Her work has appeared in AARP's print magazine and on sites such as U.S. News & World Report, Fortune, NextAdvisor, Credit Karma, and more. Kim loves to bake and exercise in her free time, and she plans to run a half marathon on each continent.
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Ashley Barnett has been writing and editing personal finance articles for the internet since 2008. Before editing for USA TODAY Blueprint, she was the Content Director for an international media company leading the content on their suite of personal finance sites. She lives in Phoenix, AZ where you can find her rereading Harry Potter for the 100th time.
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Taylor Tepper is lead editor for banking at USA Today Blueprint and is an award-winning journalist and former senior staff writer at Forbes Advisor, Wirecutter/New York Times and Money magazine. His work has also appeared in Fortune, Time, Bloomberg, Newsweek and NPR. He lives in Dripping Springs, TX with his wife and 3 kids and welcomes bbq tips.
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