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Capital gains taxes hit when you profit from selling assets like stocks, real estate or cryptocurrencies. But how much you owe depends on how long you held an asset and how much income you made that year. Short-term gains (assets held for a year or less) can be taxed as high as 37%, while long-term gains get better treatment, typically 0%, 15% or 20%.
We’ll tell you all about these taxes to help you plan, how rates shift based on your income and timeline and what the 2024-2025 rates are.
Gone are the days when long-term capital gains were taxed at 28% for everyone, no matter your income. Today’s system rewards patience, and knowing how it works could save you thousands.
Let’s take a closer look at how capital gains taxes affect your wallet.
What Are Capital Gains?
A capital gain happens when you sell an asset like stocks, real estate, cryptocurrency or NFTs for more than you paid for it. And that profit is a capital gain. Naturally, the IRS wants its cut.
There are two types of capital gains:
- Short-term (held for 1 year or less)
- Long-term (held for more than 1 year)
The main difference between short-term and long-term capital gains is that they’re taxed differently.
If you made a quick flip and sold within a year, congrats, you’re paying ordinary income tax on that profit. That means the IRS treats it like your regular paycheck. Depending on your tax bracket, that could be up to 37%.
On the other hand, if you held onto your investment for more than a year, you qualify for long-term capital gains rates, which are generally way lower.
2024 Long-Term Capital Gains Tax Rates
2025 Long-Term Capital Gains Tax Rates
How Your Income Affects Long-Term Capital Gains Taxes
Long-term capital gains come from selling assets held for more than one year, and they’re taxed at lower, preferential rates. In 2024 and 2025, these rates are 0%, 15% or 20% depending on your income and filing status.
Here’s where your income bracket matters. If your total taxable income stays below a certain threshold, your long-term gains may be taxed at 0%. But if a gain pushes you into a higher bracket, part of that gain could be taxed at 15% or even 20%.
For instance, if you’re single and earn $45,000, and you sell long-term stock for a $10,000 profit, your new taxable income becomes $55,000. That bumps part of your capital gain into the 15% tax bracket.
This tiered system means long-term gains are more tax-friendly, but only if you plan your income and timing wisely.
How Short-Term Capital Gains Are Taxed Like Regular Income
Short-term capital gains occur when you sell an asset you’ve held for one year or less. The IRS treats these gains as ordinary income, meaning they’re taxed at the same rate as your wages, freelance income, or any other money you earn.
Your tax rate depends on your total taxable income and filing status. For example, if you’re a single filer making $60,000 in 2024, a short-term capital gain would be taxed at your marginal tax rate, likely 22%. If that gain pushes your total income into a higher bracket, you could owe even more.
To calculate short-term capital gains tax, multiply your gain by the marginal rate for your income bracket. These taxes can add up quickly, especially if you’re actively trading or flipping assets within a year.
Federal vs. State Capital Gains Taxes
Even if your federal capital gains tax rate is favorable, your state might still want a share of your profits.
A few state examples:
- California: No special capital gains tax. It taxes all income, including gains, as regular income (up to 13.3%).
- New York: Same. Your capital gains are taxed just like your income (up to 10.9%).
- Florida and Texas: No state income tax. So, there is no state capital gains tax.
Bottom line: Check your state laws. The federal tax is just part of the equation.
4 Pro Tips to Lower Your Capital Gains Tax Bill
If you’re trying to be smart (and legally keep more of your money), here’s what savvy investors do:
1. Hold Investments Longer
That 12-month rule is gold. Holding for just a bit longer could drop your rate from 37% to 15% or even 0%.
2. Offset Gains with Losses
This is called tax-loss harvesting. Got a winning stock? Sell a losing one, too, and use the loss to reduce your tax bill.
3. Mind the Income Thresholds
If you’re near a cutoff (say, the edge of the 0% bracket), you might consider delaying a sale or spreading it over two years.
4. Use Tax-Advantaged Accounts
Capital gains inside Roth IRAs or 401(k)s aren’t taxable if you follow the rules.
So, although the IRS wants a piece, with a little planning, you can keep more of your gains and less of the tax pain.
How Tax Apps Can Be a Game-Changer for Capital Gains Tracking
A good tax app can make calculating capital gains a lot less stressful, especially if you’ve sold stocks, crypto or other investments across multiple platforms. These apps pull together your transaction history, figure out whether each sale qualifies as short- or long-term, and automatically apply the right tax rate based on your income and filing status.
For example, if you bought shares of Apple in 2022 and sold them for a profit in 2024, the app would flag that as a long-term gain and calculate how much tax you owe based on your current income bracket. If you sold crypto within six months of buying it, it’d label that as a short-term gain and tax it accordingly, just like income.
Some apps also spot opportunities to lower your tax bill, like matching gains with losses (a strategy called tax-loss harvesting), or alerting you if selling now would push you into a higher bracket. For investors juggling multiple accounts or frequent trades, a tax app can help keep things organized, accurate and less likely to trigger an IRS headache.