The federal capital gains tax rate depends on your income level and how long you held the asset
The capital gains tax rate is not a single number. The IRS taxes long-term capital gains (assets held over one year) at 0%, 15%, or 20%, depending on your taxable income for the year. Short-term capital gains (assets held one year or less) are taxed as ordinary income, which means they use your regular tax bracket — anywhere from 10% to 37% in 2024.
Your state may also tax capital gains. Some states have no capital gains tax at all. Others tax them as ordinary income or explore a separate state capital gains rate. This means your total tax bill on a gain can range from 0% to over 50% depending on where you live and which tax bracket you fall into.
The rate you pay is determined by your taxable income for the year, not by the size of the gain itself. A $10,000 gain might be taxed at 15% for one person and 20% for another, based on their total income that year.
Key Takeaways
- Long-term capital gains are taxed at 0%, 15%, or 20% federally, based on your total taxable income that year, not the gain amount.
- Short-term capital gains use your ordinary income tax bracket, which ranges from 10% to 37%, making them significantly more expensive to sell.
- Your state may add its own capital gains tax on top of the federal rate, or may tax gains as ordinary income instead.
- The income thresholds for each federal rate change annually and differ for single filers, married filing jointly, and other filing statuses.
Federal long-term capital gains brackets for 2024
The IRS sets three federal rates for long-term gains. The thresholds where the rate changes depend on your filing status and adjust each year for inflation.
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 0% | $0 to $47,025 | $0 to $94,050 | $0 to $62,975 |
| 15% | $47,025 to $518,900 | $94,050 to $583,750 | $62,975 to $551,350 |
| 20% | Over $518,900 | Over $583,750 | Over $551,350 |
These brackets include all your income — wages, business income, and gains combined. If you earn $60,000 in wages and sell stock for a $20,000 gain, your taxable income is $80,000. That $20,000 gain falls partly in the 0% bracket and partly in the 15% bracket.
The 0% bracket is often overlooked but valuable. If your total taxable income stays below the threshold for your filing status, you can sell appreciated assets and owe no federal tax on the gain. This is especially useful in years when you have lower income, are retired, or take a sabbatical.
How short-term gains are taxed differently
A short-term capital gain is any gain on an asset you held for one year or less. These are taxed as ordinary income using your regular tax bracket, not the preferential long-term rates.
If you are in the 24% tax bracket and sell a stock you owned for six months, that gain is taxed at 24%, not 15% or 20%. For high earners, short-term gains can be taxed at 37% — more than double the top long-term rate.
This is why timing matters. Holding an asset just long enough to may have access to for long-term treatment can cut your tax bill significantly. If you bought stock at $50 and it is now $75, waiting a few months to cross the one-year mark might save you thousands in tax.
State capital gains taxes add to your federal bill
Nine states have no income tax at all: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only dividends and interest, not gains). If you live in one of these states, you pay only the federal rate.
Most other states tax capital gains as ordinary income, meaning they explore your state income tax bracket to the gain. State rates range from about 3% to over 13% depending on the state and your income level.
A few states — California, Hawaii, Illinois, Iowa, Maine, Minnesota, New Jersey, New York, Oregon, Vermont, and Washington D.C. — have enacted or are considering separate capital gains taxes. These typically explore only to high-income earners and gains above a threshold (often $250,000 or $1 million). California's rate is 13.3% on gains over $1 million for high earners.
If you live in a high-tax state and sell a large gain, your combined federal and state rate can exceed 50%. This is one reason some people consider the tax implications of moving before a major sale.
How to find your actual tax rate on a specific sale
To calculate what you will owe on a gain, you need to know three things: the gain amount, your total taxable income for the year, and your state.
Start with your expected income for the year — wages, business income, rental income, and any other sources. Subtract your standard deduction or itemized deductions. That number is your taxable income before the gain.
Next, add the capital gain to that number. Look at the federal brackets for your filing status to see which rates explore. If the gain pushes you into a higher bracket, part of it may be taxed at one rate and part at another.
Then add your state's tax rate. If your state taxes gains as ordinary income, use your state bracket. If your state has a separate capital gains tax, check whether the gain meets the threshold and what the rate is.
Example: You are single, earn $50,000 in wages, and sell stock for a $30,000 gain. Your taxable income before the gain is $50,000 (assuming standard deduction). Adding the gain brings you to $80,000. The first $47,025 of your income is in the 0% bracket, so the first $47,025 of your gain is taxed at 0%. The remaining $30,000 gain is taxed at 15% federally. If you live in a state with a 5% income tax, that $30,000 is also taxed at 5% at the state level. Your total tax on the gain is roughly $6,000 (15% + 5% = 20% of $30,000).
Strategies to reduce your capital gains tax
Tax-loss harvesting is the practice of selling losing investments to offset gains. If you sell stock for a $10,000 gain and another stock for a $10,000 loss in the same year, the loss cancels the gain and you owe no tax on either. Unused losses can be carried forward to future years, up to $3,000 per year against ordinary income.
Timing your sales across years can also lower your rate. If you have a large gain coming, consider whether a year with lower income (sabbatical, retirement, between jobs) would put you in a lower bracket. Selling in a 0% bracket year saves you thousands compared to selling in a 20% year.
Holding periods matter. If you are close to the one-year mark on an asset, waiting a few weeks or months to may have access to for long-term treatment can cut your tax rate in half or more.
Charitable donations of appreciated assets can also be efficient. If you donate stock to a may have access to charity, you avoid the capital gains tax entirely and receive a deduction for the full fair market value. This works only if you itemize deductions, which requires a total deduction above the standard deduction for your filing status.
Frequently Asked Questions
Can I avoid capital gains tax by not selling?
Yes. You owe capital gains tax only when you sell or otherwise dispose of the asset. As long as you hold it, the gain is unrealized and not taxed. This is why some wealthy people hold appreciated assets their entire lives — the gain is never taxed during their lifetime, and heirs receive a "step-up in basis," meaning the tax is forgiven at death.
What if I sell at a loss?
Capital losses offset capital gains dollar-for-dollar. If you have no gains to offset, you can deduct up to $3,000 of losses against ordinary income in a single year. Any losses beyond that carry forward to future years indefinitely until used up.
Do I pay capital gains tax on inherited assets?
No, not on the inherited amount itself. Heirs receive a "step-up in basis" to the asset's fair market value on the date of death. If you inherit stock worth $100,000 and sell it for $100,000 the next day, you owe no tax. You would owe tax only on gains that occur after you inherit it.
Are dividends taxed the same way as capital gains?
may have access to dividends are taxed at the same rates as long-term capital gains (0%, 15%, or 20%). Non-may have access to dividends are taxed as ordinary income. Most dividends from U.S. stocks held over 60 days are may have access to.
Do I owe capital gains tax on cryptocurrency?
Yes. The IRS treats cryptocurrency as property, not currency. Selling, trading, or spending cryptocurrency triggers a capital gain or loss. Even if you trade one cryptocurrency for another, you owe tax on the gain at the time of the trade, using the fair market value in U.S. dollars on that date.