Table of Contents
- What Is Capital Gains Tax?
- Capital Gains Tax Rates Today
- Capital Gains Tax Rates for Tax Year 2025
- Short-Term Capital Gains Tax Rates for Tax Year 2025
- Short-Term Capital Gains Tax Rates for Tax Year 2026
- Tips for Lowering Capital Gains Taxes
- Tax-Loss Harvesting
- How US Capital Gains Taxes Compare
- FAQ
What Is Capital Gains Tax?
Capital gains are the profits investors may see from selling investments and other assets, like stocks, bonds, properties, vehicles, and so on. Capital gains tax doesn’t apply when you own these assets — it only applies when you profit from selling them, and the gain has to be reported to the IRS.
Short-term capital gains (from assets you’ve held for a year or less) are taxed at a higher marginal income tax rate. Long-term capital gains, which apply to assets you’ve held for more than a year, are taxed at the lower capital gains rate.
Other factors can affect an investor’s tax rate on gains, including: which asset you’re selling, your annual income, as well as your filing status. Capital gains tax rates typically change every year. Here, we’ll cover 2025 capital gains tax rates (for returns filed in 2026), and 2026 rates (for returns filed in 2027). Investment gains may also be subject to state and local taxes, as well.
Key Points
• Capital gains tax is levied on the profit (capital gains) you make from selling investments or assets like stocks and properties.
• Gains are classified as either short-term (from assets held for one year or less) or long-term (from assets held for more than a year).
• Short-term gains are taxed at a higher marginal income tax rate compared to the lower long-term capital gains rate.
• Investments held within tax-advantaged retirement accounts, such as an IRA or 401(k), are generally not subject to capital gains tax as the money grows, though withdrawals may be subject to income tax.
• Holding an investment for more than a year to qualify for the long-term rate, and utilizing strategies like tax-loss harvesting (selling investments at a loss to offset capital gains) can help lower your overall capital gains tax liability.
Capital Gains Tax Rates Today
Capital gains and losses result from selling assets. Capital gains occur when the asset is sold for more than its purchase price. A capital loss is when an investor sells an asset for less than its original value.
How long you hold an investment before selling it can make a big difference in how much you pay in taxes.
When you profit from an asset after owning it for a year or less, it’s considered a short-term capital gain. If you profit from it after owning it for at least a year, it’s a long-term capital gain.
Capital gains tax applies to investments that are sold when you’re investing online or through a traditional taxable brokerage; again, appreciated assets are not taxed until they’re sold. Gains may also be subject to state and local tax.
With a tax-deferred retirement account, such as an IRA or 401(k), you don’t pay any capital gains; you do owe income tax on withdrawals, however.
Other Capital Gains Tax Rules
Certain investments are subject to capital gains even if you don’t sell those securities. For example, a dividend-paying stock can produce a taxable gain because dividends are a type of income.
Taxes on qualified dividends are paid at long-term capital gains rates. Taxes on ordinary dividends are taxed at the marginal income tax rate, the same as short-term gains. Because the long-term capital gains tax rate is lower than the marginal income tax rate, qualified dividends are generally preferred vs. ordinary dividends.
Again, if divided-paying investments are held in a tax-advantaged account, those dividends are also tax deferred.
Capital Gains Tax Rates for Tax Year 2025
Long-term capital gains taxes for an individual are simpler and lower than for married couples. These rates apply to gains from an asset sold after one year, and fall into three brackets: 0%, 15%, and 20%.
Long-Term Capital Gains Rates, 2025
The following table shows the long-term capital-gains tax rates, by income bracket and filing status, for the 2025 tax year, according to the IRS.
| Capital Gains Tax Rate | Single | Married, Filing Jointly | Married, Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | Up to $48,350 | Up to $96,700 | Up to $48,350 | Up to $64,750 |
| 15% | $48,351 to $533,400 | $96,701 to $600,050 | $48,351 to $300,000 | $64,751 – $566,700 |
| 20% | Over $533,401 | Over $600,051 | Over $300,001 | Over $566,701 |
Long-Term Capital Gains Tax Rates, 2026
The following table shows the long-term capital gains tax rates for the 2026 tax year by income and filing status, according to the IRS.
| Capital Gains Tax Rate | Single | Married, Filing Jointly | Married, Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 | Up to $49,450 | Up to $66,200 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 | $49,451 to $306,850 | $66,201 to $579,600 |
| 20% | Over $545,500 | Over $613,700 | Over $306,850 | Over $579,600 |
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Short-Term Capital Gains Tax Rates for Tax Year 2025
The short-term capital gains are taxed as regular income at the “marginal rate,” so the rates are based on the federal income tax bracket you’re in.
The Internal Revenue Service (IRS) changes these numbers every year to adjust for inflation. You may learn your tax bracket by going to the IRS website, or asking your accountant.
2025 Short-Term Capital Gains Tax Rates
Here’s a table that shows the federal income tax brackets for the 2025 tax year, which are used for short-term gains, for tax returns that are usually filed in 2026, according to the IRS.
| Marginal Rate | Single filers | Married, filing jointly | Head of household | Married, filing separately |
|---|---|---|---|---|
| 10% | $0 to $11,925 | $0 to $23,850 | Up to $17,000 | $0 to $11,925 |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $17,001 to $64,850 | $11,926 to $48,475 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $64,851 to $103,350 | $48,476 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 to $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,500 | $197,301 to $250,525 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,501 to $626,350 | $250,526 to $375,800 |
| 37% | Over $626,350 | Over $751,600 | Over $626,350 | Over $375,800 |
Short-Term Capital Gains Tax Rates for Tax Year 2026
This table shows the federal marginal income tax rates for tax year 2026, which apply to short-term capital gains (for tax returns that are usually filed in 2027).
| Marginal Rate | Single filers | Income Married, filing jointly | Head of household | Married, filing separately |
|---|---|---|---|---|
| 10% | $0 to $12,400 | $0 to $24,800 | $0 to $17,700 | $0 to $12,400 |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 | $17,701 to $67,450 | $12,401 to $50,400 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 | $67,451 to $105,700 | $50,401 to $105,700 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,750 | $105,701 to $201,775 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,751 to $256,200 | $201,776 to $256,225 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,201 to $640,600 | $256,226 to $384,350 |
| 37% | Over $640,600 | Over $768,700 | Over $640,600 | Over $384,350 |
Tips for Lowering Capital Gains Taxes
Hanging onto an investment for more than a year can lower your capital gains taxes significantly.
Capital gains taxes also don’t apply to tax-advantaged accounts like 401(k) plans, 529 college savings accounts, or when you open an IRA. So selling investments within these accounts won’t generate capital gains taxes.
Instead, traditional 401(k)s and IRAs are taxed when you take distributions, while qualified distributions for Roth IRAs and 529 plans are tax-free.
Single homeowners also get a tax exclusion on the first $250,000 in profit they make from the sale of their primary residence, which they need to have lived in for at least two of the past five years. The limit is $500,000 for a married couple filing jointly.
Tax-Loss Harvesting
Tax-loss harvesting is another way to potentially save money on capital gains. Tax-loss harvesting is the strategy of selling some investments at a loss to offset the tax on profits from another investment.
Using short-term losses to offset short-term gains is a way to take advantage of tax-loss harvesting — because, as discussed above, short-term gains are taxed at higher rates. IRS rules also dictate that short-term or long-term losses must be used to offset gains of the same type, unless the losses exceed the gains from the same type.
Investors can also apply losses from investments of as much as $3,000 to offset ordinary income. And because tax losses don’t expire, if only a portion of losses was used to offset income in one year, the investor can “save” those losses to offset taxes in another year. This is known as a tax-loss carryforward.
Understanding the Wash-Sale Rule
While it may be useful in some cases to sell securities in order to harvest losses, it’s important to know about something called the wash-sale rule.
Per the IRS, the wash-sale rule states that if an investor sells an investment for a loss, then buys the same or a “substantially identical” asset within 30 days before or after the sale, they cannot use the original loss to offset capital gains or ordinary income and claim the tax benefit.
The wash-sale rule sounds straightforward, but the details are complicated. If you plan to sell securities at a loss in order to claim the tax benefit, you may want to consult a professional.
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How US Capital Gains Taxes Compare
Generally, capital gains tax rates affect the wealthiest taxpayers, who typically make a bigger chunk of their income from profitable investments.
Here’s a closer look at how capital gains taxes compare with other taxes, including those in other countries.
Compared to Other Taxes
The highest long-term capital gains taxes rate of 20% is lower than the highest marginal rate of 37%.
Proponents of the lower long-term capital gains tax rate say the discrepancy exists to encourage investments.
Comparison to Capital Gains Taxes in Other Countries
In 2025, the Tax Foundation listed the capital gains taxes of the 35 different European Organization for Economic Cooperation and Development (OECD) countries. The U.S. maximum rate of 20% is roughly midway on the spectrum of comparable capital gains taxes.
In comparison, Denmark had the highest top capital gains tax at a rate of 42%. Norway was second-highest at 37.8%. The Netherlands were third on the list, at 36%. In addition, the following European countries all levied higher capital gains taxes than the U.S. (listed in order from the highest to lowest rate): Finland, France, Ireland, Sweden, Spain, Latvia, Austria, Germany, Italy, Czech Republic, and Iceland.
Comparing Historical Capital Gains Tax Rates
Because short-term capital gains tax rates are the same as those for wages and salaries, they adjust when ordinary income tax rates change. As for long-term capital gains tax, Americans today are paying rates that are relatively low historically. Today’s maximum long-term capital gains tax rate of 20% started in 2013.
For comparison, the high point for long-term capital gains tax was in the 1970s, when the maximum rate was at 35%.
Going back in time, in the 1920s the maximum rate was around 12%. From the early 1940s to the late 1960s, the rate was around 25%. Maximum rates were also pretty high, at around 28%, in the late 1980s and 1990s. Then, between 2004 and 2012, they dropped to 15%.
The Takeaway
Capital gains taxes are the levies you pay from making money on investments. The IRS updates the tax rates every year to adjust for inflation.
It’s important for investors to know that capital gains tax rates can differ significantly based on whether they’ve held an investment for a year or less (for short-term gains), or more than a year (for long-term gains). An investor’s income level also determines how much they pay in capital gains taxes.
An accountant or financial advisor can suggest ways to lower your capital gains taxes as well as help you set financial goals.
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FAQ
Why is capital gains tax important?
When investors decide how long to hold investments, it’s a complex decision. Given that long-term capital gains rates are more favorable, some investors may want to hold onto their profitable investments for at least a year to get the lower rate.
Can you pay zero capital gains tax?
If you meet certain income criteria, yes. The lowest capital gains rate of 0% applies if your taxable income for tax year 2025 is equal to or less than $94,050 (married filing jointly); $47,025 (single, married filing separately, qualifying surviving spouse); and $63,000 for head of household. For tax year 2026, the 0% rate applies if your taxable income is equal to or less than $98,900 (married, filing jointly); $49,450 (single, married filing separately, qualifying surviving spouse); $66,200 (head of household).
Can capital losses reduce personal income tax?
In some cases yes: If your capital losses for a given year exceed your capital gains, you can deduct up to $3,000 in losses from your ordinary income (married, filing jointly; $1,500 if you’re married, filing separately). Losses can be applied to future capital gains or to income, in what’s known as a tax-loss carryforward.
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