Capital gains tax rates depend on how long you held the asset and your total income for the year
The IRS taxes investment profits at different rates based on two things: whether you held the investment for more or less than one year, and your taxable income bracket for that tax year. Long-term gains (held over one year) are taxed at lower rates than short-term gains (held one year or less). Your tax bracket is determined by your total income, not just the gain itself.
For 2024, long-term capital gains rates are 0%, 15%, or 20%. Short-term gains are taxed as ordinary income, which means they use the same brackets as wages and salary — 10%, 12%, 22%, 24%, 32%, 35%, or 37%. The rate you pay depends on your filing status and total taxable income, not on the size of the gain.
These rates change each year because the IRS adjusts tax brackets for inflation. The brackets for 2024 are different from 2023, which were different from 2022. When you file your 2024 return in 2025, you will use 2024 rates and brackets.
Key Takeaways
- Long-term capital gains (assets held over one year) are taxed at 0%, 15%, or 20% depending on your income bracket; short-term gains use ordinary income tax rates of 10% to 37%.
- Your tax bracket is based on your total taxable income for the year, including wages, interest, and other income combined with the capital gain.
- The IRS adjusts tax brackets every year for inflation, so the income thresholds that determine your rate change annually.
- You report long-term and short-term gains separately on Schedule D, and the IRS uses Form 8949 to track the sale details of each investment.
Long-term capital gains rates for 2024
Long-term gains are taxed at 0%, 15%, or 20%. Which rate applies to you depends on your filing status and your total taxable income for the year. The 0% rate applies to the lowest earners, 15% to middle-income filers, and 20% to the highest earners.
For single filers in 2024, the 0% rate applies if your taxable income is $47,025 or less. The 15% rate applies to income between $47,026 and $518,900. The 20% rate applies to income over $518,900. For married filing jointly, the thresholds are higher: 0% up to $94,050, 15% from $94,051 to $583,750, and 20% above $583,750. Head of household filers have different thresholds again.
These thresholds include all your income for the year — wages, interest, dividends, and capital gains combined. If you earn $40,000 in wages and have a $10,000 long-term gain, your total taxable income is $50,000, which puts you in the 15% bracket for the gain, not the 0% bracket.
Short-term capital gains rates for 2024
Short-term gains are taxed as ordinary income using the same tax brackets as your salary or wages. For 2024, those rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. A single filer in the 22% tax bracket pays 22% on short-term gains, not 15% or 20%.
Short-term gains are almost always more expensive than long-term gains. The only exception is if you are in the 10% or 12% ordinary income bracket and would otherwise pay 15% on a long-term gain — but this is rare and only happens at very low income levels.
The holding period matters completely. If you buy a stock on January 15, 2024, and sell it on January 14, 2025, it is short-term. If you sell it on January 16, 2025, it is long-term. One day changes the tax rate you owe.
How the IRS determines your holding period
The IRS counts the holding period from the day after you buy the asset to the day you sell it. If you buy on a Monday, the holding period starts on Tuesday. You must hold the asset for more than one year for it to may have access to as long-term.
The one-year rule is strict. Holding for 365 days is not enough if you bought and sold on the same calendar date — you need 366 days in a leap year. If you bought on March 15, 2023, and sold on March 15, 2024, it is short-term. You must sell on March 16, 2024, or later for it to be long-term.
For stocks and mutual funds, the holding period is based on the trade date, not the settlement date. The settlement date (when money actually moves) is usually two business days later, but the IRS uses the trade date. If you sell on December 31, the trade date is December 31, even if the money does not arrive until January 2.
Tax brackets and income thresholds for 2024
The thresholds that determine which capital gains rate you pay vary by filing status. These numbers are the income levels where each rate begins and ends for the 2024 tax year.
| Filing Status | 0% Long-Term Rate | 15% Long-Term Rate | 20% Long-Term Rate |
|---|---|---|---|
| Single | $0–$47,025 | $47,026–$518,900 | $518,901+ |
| Married Filing Jointly | $0–$94,050 | $94,051–$583,750 | $583,751+ |
| Head of Household | $0–$62,975 | $62,976–$551,350 | $551,351+ |
| Married Filing Separately | $0–$47,025 | $47,026–$291,875 | $291,876+ |
These thresholds are for 2024 tax returns filed in 2025. The IRS will publish new thresholds for 2025 in late 2024. If you are filing a prior year return, use the brackets from that year, not the current year.
Net investment income tax and state taxes on capital gains
The federal capital gains rate is not the only tax you may owe. High-income earners also pay a Net Investment Income Tax (NIIT) of 3.8% on investment income, including capital gains. This applies if your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly).
Most states also tax capital gains. Some states tax them as ordinary income at your regular state tax rate. A few states — including California, New York, and Illinois — have separate capital gains tax rates. Some states, like Florida and Texas, do not tax capital gains at all. Your state tax is separate from the federal rate and adds to your total bill.
When you calculate what you owe on an investment sale, add the federal rate, the NIIT if you may have access to, and your state rate. A $10,000 long-term gain taxed at 15% federally, 3.8% NIIT, and 10% state tax costs $2,880 in total tax, not $1,500.
How to report capital gains on your tax return
You report capital gains on Schedule D (Form 1040, Capital Gains and Losses). List each sale separately, showing the date bought, date sold, cost basis, sale price, and gain or loss. The IRS uses this to verify that you calculated the holding period correctly.
For most stock and mutual fund sales, your broker sends you a Form 1099-B (Proceeds from Broker and Barter Exchange Transactions) showing the sales you made during the year. You use this form to fill in Schedule D. If you sold real estate, you report it on Schedule D as well, but you may also need to file Form 4797 (Sales of Business Property) depending on the type of property.
You also complete Form 8949 (Sales of Capital Assets) to reconcile the information on your 1099-B with what you report on Schedule D. This form catches discrepancies between what your broker reported and what you calculated.
Frequently Asked Questions
Can I reduce my capital gains tax by timing when I sell?
Yes, timing can affect which tax bracket your gain falls into. If you are close to a bracket threshold, selling in a year when your other income is lower may put the gain in a lower bracket. You can also harvest losses in one year to offset gains in another, though losses can only offset gains plus up to $3,000 of ordinary income per year.
What if I inherited an investment — do I pay capital gains tax on the increase in value before I inherited it?
No. Inherited investments receive a "step-up in basis," meaning the cost basis resets to the fair market value on the date of death. You only pay capital gains tax on the increase in value after you inherited it. This is one of the largest tax breaks available.
Do I owe capital gains tax if I sold at a loss?
No tax is owed on the loss itself. You can use the loss to offset capital gains from other sales. If your losses exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income in that year. Unused losses carry forward to future years.
Are dividends taxed the same way as capital gains?
may have access to dividends are taxed at the same long-term capital gains rates (0%, 15%, or 20%). Non-may have access to dividends are taxed as ordinary income. Your broker reports which dividends are may have access to on your 1099-DIV form.
What happens if I sell cryptocurrency or digital assets?
Cryptocurrency is treated as property by the IRS, not currency. When you sell it, you owe capital gains tax on the difference between what you paid and what you received, using the same long-term and short-term rates as stocks. You report it on Schedule D the same way.