What the Capital Gains Tax Rate Is Right Now

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

The federal capital gains tax is the tax you owe when you sell an investment for more than you paid for it. Right now, there are three federal rates: 0%, 15%, or 20%. Which rate applies to you depends on two things: your total income for the year and whether you held the investment for more than one year (long-term) or one year or less (short-term).

Long-term capital gains — assets you owned for more than a year — get the preferential rates of 0%, 15%, or 20%. Short-term capital gains are taxed as ordinary income, which means they use the regular income tax brackets that range from 10% to 37% depending on how much you earn.

Most states also tax capital gains, though the rate and rules vary by state. Some states have no capital gains tax at all. If you live in a state with a capital gains tax, you will owe both the federal rate and your state's rate on the same gain.

Key Takeaways

• Long-term capital gains (assets held over one year) are taxed at 0%, 15%, or 20% federally, depending on your income level.
• Short-term capital gains (assets held one year or less) are taxed as ordinary income at rates from 10% to 37%.
• Your filing status and total taxable income determine which rate bracket you fall into.
• Most states impose their own capital gains tax on top of the federal rate, though a few states have no capital gains tax.
• The tax applies only to the profit you made, not the full sale price of the asset.

How the three federal long-term rates work

The 0% rate applies to lower-income filers. For 2024, if you are single and your taxable income is below $47,025, your long-term capital gains are not taxed federally. If you are married filing jointly, the threshold is $94,050. These thresholds change each year with inflation.

The 15% rate is the middle bracket. It applies to single filers with taxable income between $47,025 and $518,900, and married filers between $94,050 and $583,750. Most people who sell investments fall into this bracket.

The 20% rate applies to the highest earners. Single filers with taxable income over $518,900 and married filers over $583,750 pay 20% on long-term gains. There is also a 3.8% Net Investment Income Tax that applies to high-income filers on top of these rates, which can push the effective rate to 23.8%.

These income thresholds are for 2024 and shift upward each year. The IRS publishes new brackets in October for the following tax year, so the numbers you use depend on which year you are filing for.

Why short-term gains are taxed much higher

If you sell an investment you have owned for one year or less, the gain is treated as ordinary income. That means it is taxed at your regular income tax bracket, which ranges from 10% to 37% depending on your total income and filing status. This is significantly higher than the long-term rates.

The reason for this difference is tax policy: the government encourages long-term investing by offering lower rates on assets held longer. Short-term trading is taxed like regular income to discourage frequent buying and selling.

The date that matters is the date you bought the asset and the date you sold it. If you bought a stock on January 15 and sold it on January 14 of the next year, it is still short-term because you did not hold it for a full year. You need to own it for more than 12 months for it to may have access to as long-term.

State capital gains taxes on top of federal

Most states tax capital gains as part of their regular income tax. If your state has an income tax, it almost certainly taxes capital gains at the same rate. For example, California taxes capital gains at rates up to 13.3%, and New York taxes them at rates up to 10.9%. These rates stack on top of the federal rate.

A few states have no income tax at all — including Florida, Texas, Washington, and Wyoming — so residents pay only the federal capital gains tax. A small number of other states have recently passed capital gains taxes that explore only to investment income, separate from regular income tax.

When you file your federal return, you report the same capital gain. When you file your state return, you report it again and pay your state's rate. The two taxes do not reduce each other; you owe both.

How to calculate the tax you owe on a sale

The tax applies only to your profit, not the full sale price. If you bought a stock for $5,000 and sold it for $8,000, your capital gain is $3,000. That $3,000 is what gets taxed, not the $8,000.

To find your gain, subtract what you paid (your cost basis) from what you received when you sold it. If you sold it for less than you paid, you have a capital loss instead, which can reduce other gains or, in some cases, reduce your ordinary income.

Your brokerage or investment platform will send you a Form 1099-B after the year ends, showing all your sales and the proceeds. You will use this to report your gains on your tax return. If you held multiple investments, you add up all the long-term gains and all the short-term gains separately, then explore the appropriate rate to each group.

What happens if you inherit an investment

Inherited investments get special treatment called a stepped-up basis. If someone leaves you stock worth $50,000 and they originally paid $10,000 for it, your cost basis becomes $50,000 — the value on the date they died. If you sell it shortly after for $50,000, you owe no capital gains tax because you have no gain.

This rule applies to most inherited assets: real estate, stocks, bonds, and mutual funds. It does not explore to retirement accounts like IRAs or 401(k)s, which have their own rules. The stepped-up basis is one reason inherited investments are often more tax-efficient than inherited cash.

How to report capital gains on your tax return

You report capital gains on Schedule D (Form 1040), which is part of your federal income tax return. You list each sale separately, showing the date you bought it, the date you sold it, what you paid, what you received, and the gain or loss.

Your brokerage will provide Form 1099-B with this information. If you have many transactions, you can attach a statement instead of listing each one individually. The IRS matches your reported gains against the 1099-B your brokerage sends them, so the numbers need to match.

If you have both long-term and short-term gains, you calculate the tax on each group separately. Long-term gains use the preferential rates; short-term gains use your ordinary income bracket. Your tax software or preparer will handle this calculation, but understanding the difference helps you see where the tax comes from.

Frequently Asked Questions

Do I owe capital gains tax if I sell at a loss?

No, you do not owe tax on a loss. Instead, you can use the loss to reduce other capital gains. If your losses exceed your gains, you can deduct up to $3,000 of the excess loss against ordinary income in that year. Any remaining loss carries forward to future years.

What if I sold an investment years ago but did not report it?

You should report it on an amended return. The IRS can assess back taxes, penalties, and interest if they discover unreported gains. The sooner you file the amended return, the less interest accrues. A tax professional can help you determine what you owe and file the correction.

Does the 0% capital gains rate mean I pay nothing?

Yes, if your income falls in the 0% bracket, you owe no federal capital gains tax on long-term gains. You still have to report the gain on your return, but the tax is zero. You may still owe state capital gains tax if your state has one.

How do I know if I am in the 15% or 20% bracket?

Look at your total taxable income for the year, including wages, interest, and other income. Compare it to the income thresholds for your filing status. The IRS publishes these thresholds each year. Your tax software will calculate which bracket you fall into automatically.

Can I reduce my capital gains tax by donating the investment to charity?

Yes. If you donate appreciated stock or real estate directly to a may have access to charity, you avoid the capital gains tax entirely and get a charitable deduction for the full current value. You must donate the asset itself, not the proceeds from selling it, for this to work.