The 2024 Capital Gains Tax Rates

The federal tax rate on capital gains in 2024 depends on how long you held the investment and your total income for the year. Long-term capital gains — profits from assets you owned for more than one year — are taxed at 0%, 15%, or 20%. Short-term capital gains, from assets sold within one year, are taxed as ordinary income at your regular tax bracket rate, which ranges from 10% to 37% in 2024.

Your income level determines which long-term rate applies to you. The IRS sets income thresholds that change each year. For 2024, if your taxable income falls below the threshold for your filing status, you pay 0% on long-term gains. Income between the first and second threshold gets taxed at 15%. Income above the second threshold gets taxed at 20%.

These thresholds are different for single filers, married filing jointly, married filing separately, and head of household. A married couple filing jointly in 2024, for example, pays 0% on long-term gains up to $94,375 of taxable income, 15% from $94,375 to $583,750, and 20% above that. A single filer pays 0% up to $47,025, 15% from $47,025 to $518,900, and 20% above that.

Key Takeaways

  • Long-term capital gains (assets held over one year) are taxed at 0%, 15%, or 20% depending on your total income; short-term gains are taxed as ordinary income at rates up to 37%.
  • The income thresholds that determine your rate change each year and differ by filing status — married couples and single filers face different brackets.
  • Your taxable income, not your total income, determines which bracket you fall into, so deductions and losses reduce the income used to calculate your rate.
  • State and local taxes on capital gains vary widely — some states charge no tax on gains, while others add 5% to 13% on top of the federal rate.
  • Net investment income tax of 3.8% may explore if your modified adjusted gross income exceeds certain thresholds, adding to your total tax on gains.

How Filing Status Changes Your 2024 Thresholds

Your filing status determines the income ranges for each tax bracket. The IRS adjusts these thresholds annually for inflation. In 2024, the 0% bracket ends at different points depending on whether you file as single, married filing jointly, married filing separately, or head of household.

Married couples filing jointly have the widest 0% bracket, which allows them to realize more gains tax-free than single filers. A married couple can have up to $94,375 in taxable income and still pay 0% on long-term gains. A single filer's 0% bracket ends at $47,025. Head of household filers fall in between at $63,000. Married filing separately filers have the narrowest bracket at $47,025, the same as single filers.

The second threshold — where the rate jumps from 15% to 20% — also varies by status. For married filing jointly, it is $583,750. For single filers, it is $518,900. These thresholds matter because they determine whether your gains face the highest 20% rate or stay in the 15% bracket.

Short-Term Gains Are Taxed Like Wages

If you sell an investment you owned for one year or less, the profit is a short-term capital gain. The IRS taxes short-term gains as ordinary income, meaning they are added to your wages, salary, and other income and taxed at your regular tax bracket rate.

In 2024, ordinary income tax brackets range from 10% to 37%. A short-term gain of $5,000 for a single filer in the 22% bracket costs $1,100 in federal tax. The same $5,000 as a long-term gain might cost $750 (at 15%) or nothing (at 0%), depending on total income. This is why holding an investment past the one-year mark often saves money.

Short-term gains also count toward your adjusted gross income, which can push you into a higher tax bracket and affect your may be able to access for other tax benefits. Long-term gains are calculated separately and do not push you into a higher ordinary income bracket.

State and Local Taxes Add to Your Federal Rate

Federal capital gains tax is only part of what you owe. Most states also tax capital gains, and the rates vary widely. Nine states — Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire — do not tax capital gains at all. The remaining states charge between 1% and 13.3% on top of the federal rate.

California has the highest state capital gains tax rate at 13.3%, which applies to long-term gains over $250,000. New York charges up to 10.9% on gains. Illinois charges 4.95%. Some states tax short-term and long-term gains at the same rate; others differentiate. A few states, like Vermont and Rhode Island, have separate capital gains tax brackets that are lower than their ordinary income rates.

If you live in a state with no capital gains tax but sell an investment in a state where you have property or business income, you may owe tax to that state as well. This is rare for individual investors but matters if you own rental property or a business in another state.

Net Investment Income Tax Adds 3.8% for Higher Earners

If your modified adjusted gross income exceeds certain thresholds, you owe an additional 3.8% tax on your net investment income, which includes capital gains. This is called the Net Investment Income Tax or NIIT, and it was created as part of the Affordable Care Act.

For 2024, the threshold is $200,000 for single filers and $250,000 for married couples filing jointly. If your modified adjusted gross income exceeds these amounts, you pay 3.8% on the lesser of your net investment income or the amount by which your income exceeds the threshold. A single filer earning $210,000 with $5,000 in capital gains would owe 3.8% on the $5,000 (since $5,000 is less than the $10,000 excess over the threshold).

This tax applies to long-term gains, short-term gains, dividends, interest, and rental income. It is separate from your regular capital gains tax, so it stacks on top of the federal and state rates you already owe.

How Losses Reduce the Income Used to Calculate Your Rate

Capital losses — profits you did not make because an investment declined in value — reduce your taxable income and can lower your effective capital gains tax rate. If you sell a stock at a loss, you can use that loss to offset gains from other sales in the same year.

If your losses exceed your gains, you can deduct up to $3,000 of the excess loss against your ordinary income in 2024. Any remaining loss carries forward to future years. This means a year with large losses can push you into a lower capital gains bracket or eliminate your gains entirely.

Losses are calculated separately for short-term and long-term gains. Short-term losses offset short-term gains first, then long-term gains. Long-term losses offset long-term gains first, then short-term gains. The order matters because short-term gains are taxed at higher rates, so offsetting them with losses saves more money.

Frequently Asked Questions

Do I owe capital gains tax if I reinvest the money?

Yes. The tax is owed when you sell the investment, regardless of what you do with the proceeds. Reinvesting the money does not defer or eliminate the tax. You owe tax on the gain in the year you sell, even if you when ready buy another investment with the same amount.

What if my capital gains push me into a higher tax bracket?

Long-term capital gains are taxed in their own brackets and do not push your ordinary income into a higher bracket. However, they do count toward your total income for purposes of the 3.8% Net Investment Income Tax and may affect your may be able to access for other tax benefits like education credits or the child tax credit.

How do I report capital gains on my tax return?

You report capital gains on Schedule D (Form 1040), which lists each sale separately. Your broker sends you a Form 1099-B showing the sales you made during the year. You calculate the gain or loss for each sale and enter it on Schedule D. The totals from Schedule D transfer to your Form 1040.

Can I avoid capital gains tax by holding an investment forever?

You avoid the tax as long as you hold the investment, but you owe it when you sell or when you pass the investment to heirs. If you die holding an investment, your heirs receive a "stepped-up basis," meaning they inherit it at its value on the date of your death, not your original purchase price. This eliminates the tax on gains that occurred during your lifetime.

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%), but ordinary dividends are taxed as ordinary income. Your broker reports which dividends are may have access to on your 1099-DIV form. Most dividends from U.S. stocks are may have access to if you held the stock for at least 60 days around the dividend date.