Federal long-term capital gains rates are 0%, 15%, or 20%, depending on your total income
The federal tax rate on long-term capital gains — profits from selling an asset you held for more than one year — is not a single number. Instead, it depends on your ordinary income and filing status. The IRS sorts you into one of three brackets: 0%, 15%, or 20%. A person in the 0% bracket pays nothing on long-term gains. Someone in the 15% bracket pays 15%. Someone in the 20% bracket pays 20%. Your bracket is determined by your total taxable income for the year, not by the size of the gain itself.
This is fundamentally different from how ordinary income works. If you earn a salary, that income is taxed at rates that climb from 10% to 37% as your income rises. Long-term capital gains use their own, lower rate structure that sits on top of your ordinary income. You calculate your ordinary income first, then see where your capital gains land based on the income thresholds for each bracket.
Key Takeaways
- Long-term capital gains are taxed at 0%, 15%, or 20% federally, and your bracket depends on your total taxable income and filing status, not on the gain amount.
- The 0% bracket applies to lower-income filers; the 15% bracket covers most middle-income filers; the 20% bracket applies to high-income filers.
- Income thresholds for each bracket change every year and differ by filing status — single, married filing jointly, head of household, and married filing separately each have their own cutoffs.
- State and local taxes on capital gains vary widely; some states tax them as ordinary income, some tax them at lower rates, and a few do not tax them at all.
- The rate you pay depends on when you sold the asset (holding period) and your total income that year, not on what type of asset it was.
How the three federal brackets work
The 0% bracket is the lowest. If your taxable income falls below a certain threshold, your long-term capital gains are not taxed federally. For 2024, that threshold is $47,025 for single filers, $94,050 for married couples filing jointly, and $63,000 for heads of household. These numbers change each year because they are adjusted for inflation. The key point: if your ordinary income plus your capital gains stays below these amounts, you owe no federal tax on the gains.
The 15% bracket is the middle one and covers most people who sell investments. It applies to long-term gains that fall above the 0% threshold but below the 20% threshold. For 2024, the 15% bracket starts at $47,026 for single filers and $94,051 for married couples filing jointly. It ends at $518,900 for single filers and $583,750 for married couples filing jointly. Again, these numbers shift annually.
The 20% bracket applies to the highest-income filers. Any long-term capital gains above the 20% threshold are taxed at 20%. For 2024, that threshold is $518,901 for single filers and $583,751 for married couples filing jointly. Very few individual investors reach this bracket.
Why your total income matters, not just the gain
The brackets are based on your total taxable income, which includes wages, interest, dividends, and capital gains combined. This means you cannot isolate a capital gain and look at it alone. You must add it to everything else you earned that year.
Example: You are a single filer with a $60,000 salary. You sell stock and realize a $20,000 long-term capital gain. Your total taxable income is $80,000. The first $47,025 of your income (salary plus gains) falls in the 0% bracket. The remaining $32,975 falls in the 15% bracket. So you owe 15% on that $32,975 portion of your gain, which is $4,946. You do not owe tax on the part of your gain that stayed within the 0% threshold.
This stacking effect means the rate you pay on a gain depends partly on how much other income you had that year. A $20,000 gain might be taxed at 0% for someone with low income but at 15% or 20% for someone with high income.
Income thresholds vary by filing status and change annually
The IRS publishes new income thresholds every year. They are adjusted for inflation, so the numbers creep upward. The thresholds also differ by filing status: single, married filing jointly, head of household, and married filing separately each have their own cutoffs.
| Filing Status | 0% Bracket Ends (2024) | 15% Bracket Ends (2024) | 20% Bracket Starts (2024) |
|---|---|---|---|
| Single | $47,025 | $518,900 | $518,901 |
| Married Filing Jointly | $94,050 | $583,750 | $583,751 |
| Head of Household | $63,000 | $551,350 | $551,351 |
| Married Filing Separately | $47,025 | $291,875 | $291,876 |
These thresholds are for 2024 only. When you file your 2025 return in 2026, the IRS will have published new thresholds for that year. You can find the current year's thresholds on the IRS website or in the instructions to Form 1040.
State and local taxes on capital gains vary widely
Federal tax is only part of the picture. Most states also tax capital gains, but the rate and method differ. Some states tax long-term capital gains as ordinary income, meaning they explore their regular income tax brackets to the gain. Others tax capital gains at a lower rate than ordinary income. A few states — including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not tax capital gains at all.
California, for example, taxes long-term capital gains as ordinary income at rates up to 13.3%. New York taxes them at ordinary income rates up to 10.9%. Massachusetts taxes them at 5%. New Jersey taxes them at 3.876%. The variation is significant, and for someone in a high-tax state, state and local tax can exceed the federal tax on a large gain.
Some cities also impose local taxes on capital gains. New York City, for instance, taxes capital gains as part of its local income tax. You need to check both your state and your city or county to know your full tax bill.
Holding period determines whether gains are long-term or short-term
The 0%, 15%, and 20% rates explore only to long-term capital gains — gains on assets you held for more than one year. If you held the asset for one year or less, the gain is short-term and is taxed as ordinary income at your regular income tax rate, which can be as high as 37% federally.
The holding period is measured from the date you bought the asset to the date you sold it. If you bought stock on March 15, 2023, and sold it on March 15, 2024, you held it for exactly one year, and the gain is short-term. If you sold it on March 16, 2024, it is long-term. The difference in tax can be substantial. A $10,000 short-term gain for someone in the 37% bracket costs $3,700 in federal tax. The same gain as a long-term gain costs $2,000 (at the 20% rate).
How to report long-term capital gains on your tax return
You report capital gains on Schedule D (Form 1040), which is titled "Capital Gains and Losses." You list each sale separately: the date you bought the asset, the date you sold it, the sale price, and your cost basis (what you paid for it). The difference is your gain or loss. You then total your long-term gains and losses separately from your short-term gains and losses.
Your broker or investment firm sends you a Form 1099-B after the end of the year, which lists all the sales you made in their accounts. You use this form to fill out Schedule D. If you sold assets through multiple brokers, you will receive multiple 1099-B forms and must list all sales on the same Schedule D.
The IRS uses the information from your Schedule D to calculate your tax. If you have a net long-term capital gain (gains minus losses), that amount is added to your ordinary income, and your tax is calculated using the brackets described above. If you have a net long-term capital loss, you can deduct up to $3,000 of it against ordinary income in that year, and carry forward any remaining loss to future years.
Frequently Asked Questions
Do I owe tax on long-term capital gains if I reinvest the money?
Yes. The tax is based on the gain itself, not on what you do with the proceeds. If you sell stock for a $5,000 gain and when ready buy other stock with that money, you still owe tax on the $5,000 gain. Reinvesting does not defer or eliminate the tax.
What if I have a long-term capital loss — can I use it to offset other income?
You can deduct up to $3,000 of net capital losses against ordinary income in a single year. If your losses exceed $3,000, you carry the excess forward to future years and can deduct $3,000 per year until the loss is used up. Capital losses can also offset capital gains dollar-for-dollar.
Are dividends from stocks taxed the same way as capital gains?
may have access to dividends — dividends from U.S. corporations or may have access to foreign corporations that you held for a certain period — are taxed at the same 0%, 15%, or 20% rates as long-term capital gains. Ordinary dividends are taxed as ordinary income. Your broker will tell you which dividends are may have access to on your 1099-DIV form.
If I sell a rental property, is the gain taxed as a long-term capital gain?
If you held the property for more than one year, the gain is a long-term capital gain and is taxed at the 0%, 15%, or 20% rate. However, depreciation you claimed on the property is taxed separately at a 25% rate. You will also owe self-employment tax if you are a real estate professional. The calculation is more complex than a stock sale, so consult a tax professional.
Can I reduce my capital gains tax by timing when I sell assets?
Yes, in some cases. If you are close to the edge of a tax bracket, selling an asset in a year when your income is lower might keep you in the 0% or 15% bracket instead of pushing you into the 20% bracket. You can also harvest losses in one year to offset gains in another. These strategies require planning and depend on your specific situation.