What You Pay on Investment Profits: Current Capital Gains Tax Rates for 2024

The federal capital gains tax rate depends on your income and how long you held the investment

The federal capital gains tax rate is not a single number. The IRS taxes investment profits at three different rates — 0%, 15%, or 20% — depending on your total income for the year and whether you held the investment for more than one year. Long-term capital gains (investments you held longer than one year) get these preferential rates. Short-term capital gains (investments you sold within one year) are taxed as ordinary income at rates up to 37%.

Your tax bracket determines which rate applies. For 2024, if your income falls below a certain threshold, you pay 0% on long-term gains. The middle threshold triggers 15%. The highest earners pay 20%. These thresholds change each year because they are adjusted for inflation.

Most people pay 15% on long-term capital gains. This applies to single filers with income between roughly $47,000 and $518,000, and married couples filing jointly with income between roughly $94,000 and $583,000. The exact numbers shift annually.

Key Takeaways

• Long-term capital gains are taxed at 0%, 15%, or 20% depending on your total income for the year, while short-term gains are taxed as ordinary income at rates up to 37%.
• The income thresholds that determine which rate you pay change every year because they are adjusted for inflation.
• You must hold an investment for more than one year to may have access to for the lower long-term rates; selling within one year means ordinary income tax rates explore.
• State and local taxes on capital gains vary widely and are separate from federal rates.

How the three federal rates work in 2024

The 0% rate applies to the lowest earners. For single filers in 2024, this covers income up to $47,025. For married couples filing jointly, it covers income up to $94,050. If your total taxable income stays below these thresholds, you owe no federal tax on long-term capital gains.

The 15% rate is the middle bracket and covers most taxpayers. Single filers pay 15% on long-term gains once income exceeds $47,025 but stays below $518,900. Married couples filing jointly pay 15% between $94,050 and $583,750. This is where the majority of investors fall.

The 20% rate applies to high earners. Single filers pay 20% on long-term gains above $518,900. Married couples filing jointly pay 20% above $583,750. A small number of taxpayers reach this bracket.

These thresholds are indexed for inflation each year, which means they increase slightly annually. The IRS publishes updated numbers in late fall for the following tax year. If you are near a threshold, check the current year's numbers before calculating your tax liability.

Short-term gains are taxed differently and cost more

When you sell an investment you have owned for one year or less, the profit is a short-term capital gain. The IRS treats this as ordinary income and taxes it at your regular income tax rate, which can be as high as 37% for top earners. This is significantly higher than the long-term rates.

The holding period matters. If you buy a stock on June 15 and sell it on June 14 the following year, it is still short-term because you have not held it for more than one year. The sale must occur after the one-year anniversary to may have access to as long-term.

Many active traders and people who sell inherited investments quickly end up paying short-term rates without realizing it. If you are planning to sell an investment, checking whether you have crossed the one-year mark can save thousands in taxes.

State and local taxes add to your federal bill

Federal rates are only part of your total tax bill. Most states also tax capital gains, and some cities do as well. State rates vary widely — some states have no capital gains tax at all, while others tax gains at rates up to 13% or higher.

California, New York, and Oregon have among the highest state capital gains taxes. If you live in one of these states and sell a profitable investment, your combined federal and state rate can exceed 30%. Conversely, states like Texas, Florida, and Wyoming have no state income tax on capital gains.

Your state tax bill depends on where you live when you sell the investment, not where you bought it or where the company is based. If you move to a different state, your tax situation changes for future sales.

How to calculate what you owe on a specific sale

Start by finding your gain: the sale price minus what you originally paid (your cost basis). If you bought 100 shares at $50 per share and sold them at $75 per share, your gain is $2,500.

Next, determine whether it is short-term or long-term. Count the days from purchase to sale. If it is more than one year, use the long-term rates. If one year or less, use your ordinary income tax bracket.

For long-term gains, find your income bracket from the IRS tables for your filing status. Multiply your gain by the applicable rate (0%, 15%, or 20%). For short-term gains, multiply your gain by your ordinary income tax rate.

Then add any state or local tax. Your state's tax department website lists the rate for capital gains in your state. Some states tax long-term and short-term gains at the same rate; others differentiate.

Losses can reduce what you owe

If you sell an investment at a loss, you can use that loss to offset capital gains from other sales. If you sold one stock for a $3,000 gain and another for a $1,000 loss, your net gain is $2,000, and you owe tax on $2,000 instead of $3,000.

Losses can also offset up to $3,000 of ordinary income in a single year. If your losses exceed your gains by more than $3,000, you can carry the excess forward to future years and use it to offset gains or income then.

This strategy, called tax-loss harvesting, is common among investors who want to reduce their annual tax bill. You must sell the investment to realize the loss; straightforward holding a losing investment does not create a deductible loss.

Inherited investments get a tax break called step-up in basis

When you inherit an investment, the IRS resets its cost basis to its value on the date of the owner's death. This is called a step-up in basis. If your parent bought a stock for $10,000 and it was worth $50,000 when they died, your new cost basis is $50,000, not $10,000.

If you sell the inherited stock shortly after inheriting it for $50,000, you owe no capital gains tax because your gain is zero. This can save thousands in taxes compared to what your parent would have owed if they had sold the stock themselves.

This benefit applies to most inherited assets — stocks, bonds, real estate, and mutual funds. It does not explore to inherited retirement accounts like IRAs or 401(k)s, which have different tax rules.

Frequently Asked Questions

Do I have to pay capital gains tax if I reinvest the money?

Yes. The tax is based on the profit you made, not on what you do with the money afterward. Whether you spend the proceeds, reinvest in a different stock, or leave it in cash, you owe the same tax on the gain. Reinvesting does not defer or eliminate the tax.

What if I sell at a loss — do I get a refund?

No refund, but you can use the loss to reduce other gains or up to $3,000 of ordinary income in the current year. Any loss beyond that carries forward to future years. This is a deduction, not a refund.

Are dividends taxed the same as capital gains?

may have access to dividends are taxed at the same rates as long-term capital gains (0%, 15%, or 20%). Non-may have access to dividends are taxed as ordinary income. Your brokerage statement tells you which type you received.

Do I owe capital gains tax on mutual funds I have not sold?

Not on the unrealized gain. You owe tax only when you sell the fund or when the fund itself distributes gains to shareholders. Mutual funds sometimes make capital gains distributions even if you have not sold your shares, and those distributions are taxable.

What happens if I move to a different state after selling an investment?

You owe tax to the state where you lived when you sold the investment, not where you move to afterward. If you sold a stock while living in California and then moved to Texas, you still owe California tax on that gain.