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

The rates depend on your income and how long you held the investment

Capital gains tax rates in 2024 are 0%, 15%, or 20% on profits from selling stocks, real estate, or other investments you owned. Which rate you pay depends on two things: your total income for the year and whether you held the investment for more than one year. Long-term gains (held over one year) use the 0%, 15%, or 20% brackets. Short-term gains (held one year or less) are taxed as ordinary income at rates that go up to 37%.

The income thresholds that determine your rate change each year. For 2024, the 0% long-term rate applies if your income is below $47,025 (single filers) or $94,050 (married filing jointly). The 15% rate covers the middle range, and 20% applies to the highest earners. These thresholds are adjusted annually for inflation, so the numbers will be different in 2025.

Key Takeaways

• Long-term capital gains (investments held over one year) are taxed at 0%, 15%, or 20% depending on your total income for the year.
• Short-term capital gains (investments held one year or less) are taxed as ordinary income at rates up to 37%, which is much higher than long-term rates.
• The income thresholds that determine which rate applies change every year because they are adjusted for inflation.
• Your filing status (single, married filing jointly, head of household) affects which income threshold applies to you.

Long-term capital gains rates and 2024 income thresholds

Long-term gains receive preferential tax treatment because you held the investment for more than one year. The IRS taxes these at three rates: 0%, 15%, or 20%.

For single filers in 2024, the 0% rate applies to long-term gains if your taxable income is $47,025 or less. The 15% rate applies to income between $47,026 and $518,900. Anything above $518,900 is taxed at 20%. If you are married filing jointly, the 0% bracket extends to $94,050, the 15% bracket goes up to $583,750, and 20% applies above that.

Head of household filers have different thresholds: 0% up to $62,975, 15% from $62,976 to $551,350, and 20% above $551,350. These numbers shift upward each January to account for inflation, so you will see different thresholds in your 2025 tax year.

Short-term capital gains are taxed like regular income

If you sell an investment you owned for one year or less, the profit is a short-term capital gain. The IRS does not give this a special rate — it taxes it at your ordinary income tax rate, which ranges from 10% to 37% depending on your total income and filing status.

This is why the holding period matters so much. A $10,000 profit on a stock you held for 11 months could be taxed at 24% or 32% (ordinary rates), while the same profit on a stock you held for 13 months might be taxed at 15% (long-term rate). The difference in tax owed can be thousands of dollars.

How the IRS calculates which rate applies to you

The IRS uses your taxable income to determine your capital gains rate, not your gross income or adjusted gross income. Taxable income is what remains after you subtract the standard deduction (or itemized deductions) and certain other deductions from your adjusted gross income.

This matters because you might have a high gross income but fall into a lower capital gains bracket after deductions. For example, if you are single with $60,000 in wages but $20,000 in deductible losses, your taxable income is $40,000, which puts your long-term gains in the 0% bracket (for 2024) even though your gross income is higher.

The IRS stacks your income in order: ordinary income first, then long-term gains. So if you are single with $40,000 in wages and $20,000 in long-term gains, the first $7,025 of gains falls in the 0% bracket (up to the $47,025 threshold), and the remaining $12,975 falls in the 15% bracket.

State and local taxes on capital gains

Federal capital gains rates are only part of your tax bill. Most states also tax capital gains, though the rates and rules vary widely. Some states tax long-term and short-term gains at the same rate as ordinary income. Others have separate capital gains taxes or lower rates for long-term gains.

A few states have no income tax at all (including Florida, Texas, and Wyoming), so residents pay only federal capital gains tax. California taxes long-term gains as ordinary income at rates up to 13.3%. New York adds a state tax on top of federal rates. Check your state's tax authority website or a tax professional to understand what you owe in your state.

Net investment income tax on high earners

If your modified adjusted gross income exceeds certain thresholds, you may owe an additional 3.8% net investment income tax on top of the regular capital gains rate. This tax applies to single filers with income over $200,000 or married filers with income over $250,000.

This means a high-income earner could pay 20% federal capital gains tax plus 3.8% net investment income tax, for a combined federal rate of 23.8%. This does not include state taxes. The thresholds for this tax are not adjusted for inflation, so more people may be subject to it over time.

How to report capital gains on your tax return

You report capital gains on Schedule D (Form 1040), which lists each sale separately with the date purchased, date sold, cost basis, and sale price. The form calculates your gain or loss and sorts it into long-term and short-term categories.

If you have only a few sales, you can fill out Schedule D by hand. If you have many transactions, tax software or a tax professional usually handles this. Your brokerage sends you a Form 1099-B in January listing all your sales from the previous year, which you use to fill out Schedule D.

Frequently Asked Questions

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

No. If you sell an investment for less than you paid, you have a capital loss, not a gain. You can use losses to offset gains from other sales. If your losses exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income in that year, and carry forward any remaining loss to future years.

What if I inherit an investment — do I owe capital gains tax?

Usually no, because of "step-up in basis." When you inherit an investment, your cost basis is reset to its value on the date of death, not what the original owner paid. If you sell it shortly after inheriting it, you typically owe little or no capital gains tax. This rule does not explore to inherited retirement accounts like IRAs.

Can I avoid capital gains tax by holding an investment forever?

You avoid the tax only if you never sell. Once you sell, you owe tax on the gain at that time. If you hold until death, your heirs get the step-up in basis and can sell without owing tax on your gains. But during your lifetime, selling triggers the tax.

Are dividends taxed the same way 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 tells you which type you received on your 1099-DIV form. Most dividends from U.S. stocks are may have access to if you held the stock for at least 60 days around the dividend date.

Do I owe capital gains tax on my primary home?

You may not. If you are single and your gain is $250,000 or less (or $500,000 or less if married filing jointly), and you owned and lived in the home for at least two of the last five years, you can exclude the gain from tax entirely. Gains above these limits are taxed as long-term capital gains.