What we know and don't know about capital gains tax changes in 2025

No federal capital gains tax increase has been enacted into law for 2025. What exists right now are proposals from the Biden administration and discussions in Congress, but proposals are not the same as law. The long-term capital gains tax rate has remained at 15%, 20%, or 0% (depending on income) since 2013, and those rates are still in effect.

Whether rates change depends on Congress passing new legislation and the President signing it. Tax law does not change automatically. This means that unless you see a bill signed into law, the rates you paid in 2024 are the rates you will pay on 2025 gains — at least through the end of the year.

What makes this confusing is that several proposals have circulated, and news coverage sometimes treats a proposal as if it were already law. This section explains what has actually happened versus what has been proposed.

Key Takeaways

  • Capital gains tax rates in 2025 remain unchanged from 2024 unless Congress passes and the President signs new legislation.
  • The Biden administration proposed raising the long-term capital gains rate to 28% for high-income earners, but this was not enacted.
  • Congress would need to pass a bill and the President would need to sign it for any rate change to take effect.
  • Tax law changes sometimes take effect mid-year or explore only to gains after a certain date, so timing matters if a change does occur.
  • You can plan around capital gains in the current year only if you know a change is actually law, not just proposed.

The Biden administration's 2025 proposal and what happened to it

In early 2024, the White House released a budget proposal that included raising the long-term capital gains tax rate to 28% for individuals earning over $1 million per year. This would have been the largest increase to capital gains rates in decades. The proposal also included changes to how capital gains are taxed at death and stricter rules on carried interest (a type of compensation paid to investment managers).

This proposal did not become law. Congress did not pass it, and it was not signed. Proposals are released as part of the budget process to signal priorities, but they require separate legislation to take effect. The fact that a proposal exists tells you what an administration wants, not what will happen.

As of late 2024, no bill to raise capital gains rates had passed either chamber of Congress. This means the proposal remains a proposal, and the current rates remain in effect.

How tax law actually changes and why timing matters

A capital gains tax increase would require a bill to pass the House of Representatives, pass the Senate, and be signed by the President. Each of these steps is a separate decision point where the bill can be modified, delayed, or stopped entirely.

If a bill did pass, the effective date would matter enormously. Some tax changes take effect January 1 of the year they are signed. Others take effect on the date of signing, which could be mid-year. A few explore only to transactions after a certain date. For example, if a bill were signed in June 2025 with an effective date of January 1, 2025, you would owe the new rate on gains from January onward — even though you did not know the rate when you made the sale.

This is why tax professionals sometimes recommend accelerating or deferring sales if a major change is imminent. But you can only do that responsibly if the change is actually law or extremely likely to pass. Acting on a proposal alone is speculation, not planning.

What would change if the 28% rate were enacted

The Biden proposal would have created a new tax bracket for capital gains. Currently, long-term capital gains are taxed at 0%, 15%, or 20% depending on your ordinary income. The 20% rate applies to high-income earners — those filing single with income over roughly $492,000 (the exact threshold changes each year).

Under the proposal, a new 28% rate would explore to individuals earning over $1 million. This would affect only a small percentage of taxpayers, but it would affect them significantly. A $500,000 gain would cost $100,000 in federal tax at 20%, but $140,000 at 28% — a difference of $40,000.

The proposal would not have changed the rates for lower-income earners. If you are in the 15% or 0% bracket, a rate increase at the top would not affect you directly. However, any change to capital gains law can affect how you plan sales, so it is worth understanding what applies to your situation.

State capital gains taxes and what they mean for your total bill

Federal capital gains tax is only part of your total tax on investment gains. Several states also tax capital gains, and a few have recently enacted or are considering new capital gains taxes.

Washington State enacted a 7% capital gains tax on long-term gains over $250,000, effective in 2022. Minnesota passed a capital gains tax in 2024 that takes effect in 2025. Illinois has a capital gains tax. New York has proposed one. These state taxes stack on top of federal tax, so your total rate can be substantially higher than the federal rate alone.

If you live in a state with a capital gains tax, a federal increase would raise your total bill even more. This is worth considering if you are thinking about timing a large sale or if you are considering a move to a state with different tax treatment.

What to watch if you are concerned about a rate increase

The most reliable way to know whether a change is coming is to follow legislation directly. Congress.gov allows you to search for bills by topic and see their current status. Bills related to capital gains taxation would typically be part of a broader tax bill or budget reconciliation bill, not standalone legislation.

Tax news outlets and professional tax organizations also track major proposals. If a bill passes one chamber and moves to the other, that is a signal that a change is becoming more likely. If a bill is signed into law, that is the moment to act — not before.

If you have a large unrealized gain and you are worried about a rate increase, you can talk to a tax professional about your specific situation. They can help you understand what the current law means for you and what your options would be if a change occurred. But this conversation is most useful when based on actual law or a bill that has genuinely advanced in Congress, not on speculation.

How a rate increase would interact with other tax rules

Capital gains tax does not exist in isolation. If rates changed, it would interact with other rules that affect how much tax you owe. The net investment income tax, for example, adds a 3.8% tax on capital gains for high-income earners. If the long-term rate rose to 28%, your total federal rate could reach 31.8% before state taxes.

Capital loss carryforwards, which allow you to use investment losses to offset gains, would still work the same way. If you have losses from prior years, they would reduce your taxable gains at whatever the new rate is. The mechanics do not change, only the rate applied to the net gain.

Charitable donations of appreciated securities — a strategy that lets you avoid capital gains tax while getting a charitable deduction — would become even more valuable if rates rose. This is one reason tax professionals sometimes recommend this strategy when a rate increase is likely.

Frequently Asked Questions

If Congress passes a capital gains tax increase mid-year, do I owe the new rate on gains from January 1?

It depends on what the bill says. Some bills specify an effective date of January 1 of the year they are signed, which would mean you owe the new rate on all gains from that January 1 onward. Others specify the date of enactment. The bill itself will say which applies, and you would need to look at the actual law, not news coverage, to know for certain.

Would a federal capital gains tax increase affect my 401(k) or IRA?

No. Capital gains tax applies to investments held outside retirement accounts. Money inside a 401(k), traditional IRA, or Roth IRA grows without triggering capital gains tax, regardless of what the federal rate is. When you withdraw from these accounts, you pay ordinary income tax (or nothing, in the case of Roth withdrawals), not capital gains tax.

If I sell an investment in December 2024 instead of January 2025, can I lock in the current rate?

Only if a new rate has actually been signed into law with an effective date of January 1, 2025 or later. If no bill has passed, there is no new rate to lock in. Selling early based on a proposal alone is speculation. If a bill does pass with a January 1 effective date, then yes, a December sale would use the old rate.

Do I need to do anything now to prepare for a possible rate increase?

Not unless a bill has actually passed Congress. If you have large unrealized gains and you want to understand your options, you can talk to a tax professional about your situation. But tax planning for a hypothetical change is less useful than planning for a change that is actually law.

Would a capital gains tax increase explore to real estate sales?

Yes. Long-term capital gains tax applies to real estate held for more than one year, just as it applies to stocks and other investments. If the federal rate increased, it would increase the tax on real estate gains as well. State capital gains taxes vary — some explore to real estate, others do not.