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

The rate you pay depends on how long you held the investment and your income level

Capital gains tax is not a single rate. The federal government charges different percentages depending on two things: whether you held the investment for more than one year (long-term) or one year or less (short-term), and how much total income you earned that year. Long-term capital gains rates are 0%, 15%, or 20%. Short-term gains are taxed as ordinary income, which ranges from 10% to 37% depending on your tax bracket.

Most people pay the long-term rate because they hold stocks, real estate, or other investments for longer than a year. The 0% rate applies to lower-income filers, 15% to middle-income filers, and 20% to high-income filers. The exact income thresholds change each year and depend on your filing status (single, married filing jointly, head of household, and so on).

Short-term gains — from investments you sold within a year — are treated like wages or salary on your tax return. If you're in the 22% tax bracket, short-term gains are taxed at 22%. If you're in the 37% bracket, they're taxed at 37%. This is why holding an investment past the one-year mark often saves money.

Key Takeaways

• Long-term capital gains (held over one year) are taxed at 0%, 15%, or 20% depending on your total income for the year.
• Short-term capital gains (held one year or less) are taxed at your ordinary income tax rate, which can be as high as 37%.
• The income thresholds that determine which rate you pay change annually and vary by filing status.
• State and local taxes may add to your federal capital gains tax, and some states tax capital gains differently than the federal government.

Long-term capital gains rates and 2024 income thresholds

The three federal long-term rates are 0%, 15%, and 20%. To know which one applies to you, find your filing status in the table below and see where your taxable income falls. These thresholds are adjusted each year for inflation.

Filing Status	0% Rate	15% Rate	20% Rate
Single	Up to $47,025	$47,025 to $518,900	Over $518,900
Married Filing Jointly	Up to $94,050	$94,050 to $583,750	Over $583,750
Head of Household	Up to $62,975	$62,975 to $551,350	Over $551,350

Your taxable income includes wages, interest, dividends, and capital gains added together. If you earned $40,000 in wages and sold a stock for a $10,000 gain, your taxable income is $50,000. If you're single, that $10,000 gain falls in the 15% bracket because $50,000 is between $47,025 and $518,900.

The 0% bracket is often used by retirees or people with low income in a particular year. If you're single and your total taxable income stays under $47,025, you owe zero federal tax on long-term capital gains — even if you sold investments at a profit.

Short-term gains are taxed like your regular income

When you sell an investment you've owned for one year or less, the profit is a short-term capital gain. It's added to your wages, salary, interest, and other income, and taxed at your ordinary income tax rate. The federal rates for 2024 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.

A short-term gain can push you into a higher tax bracket. If you're single, earn $50,000 in wages, and sell a stock for a $20,000 short-term gain, your taxable income becomes $70,000. That extra $20,000 may be taxed partly at 22% and partly at 24%, depending on where the bracket boundaries fall.

This is why many investors try to hold stocks for at least 13 months before selling. The difference between short-term and long-term rates can be substantial — a 37% short-term rate versus a 20% long-term rate on the same $10,000 gain saves $1,700 in federal tax.

State and local taxes on capital gains

Most states tax capital gains as part of your regular income tax. A few states — including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming — have no state income tax at all, so residents pay only federal capital gains tax. Other states explore their income tax rate to capital gains, which can range from under 1% to over 13% depending on the state and your income level.

Some states treat capital gains differently. California, for example, taxes long-term and short-term gains the same way — as ordinary income. New York taxes capital gains as ordinary income but offers a deduction for some long-term gains. Washington state recently passed a capital gains tax of 7% on long-term gains over $250,000, separate from income tax.

If you live in a high-tax state and sell a large investment, your combined federal and state rate can exceed 50%. If you're considering a major sale, check your state's rules or speak with a tax professional about the total tax you'll owe.

How the one-year holding period is calculated

The difference between short-term and long-term hinges on one straightforward rule: you must own the investment for more than one year. "More than one year" means you need to hold it for at least 366 days, or from the purchase date through the same date the following year, plus one day.

If you buy a stock on March 15, 2024, and sell it on March 15, 2025, it's a short-term gain because you held it exactly one year. If you sell it on March 16, 2025, it's a long-term gain. The IRS counts the purchase date as day one.

This matters most when you're close to the one-year mark. If you have a large gain and are near the anniversary of your purchase, waiting a few extra days to sell can save thousands in tax by moving you from the short-term to the long-term rate.

How capital gains affect your tax bracket and other deductions

Capital gains are added to your other income to calculate your total taxable income. This can have ripple effects on other parts of your tax return. If your income rises above certain thresholds, you may lose deductions or credits you would have otherwise received, or you may owe additional taxes on Social Security benefits or Medicare premiums.

For example, if you're married filing jointly and your modified adjusted gross income exceeds $250,000, you're subject to the Net Investment Income Tax — an additional 3.8% tax on capital gains and other investment income. This tax was introduced in 2013 and applies to high-income households.

Some taxpayers use strategies like harvesting losses in one year to offset gains in another, or timing large sales across multiple years, to manage their total tax burden. These strategies require planning and record-keeping, and the rules are complex enough that many people consult a tax professional before executing them.

Frequently Asked Questions

Do I owe capital gains tax if I inherited stock or real estate?

No, not on the inherited value itself. When you inherit an investment, its value is "stepped up" to the market price on the date of death. If you inherit stock worth $100,000 and sell it the next day for $100,000, you owe no capital gains tax. You only owe tax on gains that occur after you inherit it.

What if I sold an investment at a loss?

Capital losses can offset capital gains. If you sold one stock for a $5,000 gain and another for a $3,000 loss, you report a net gain of $2,000 and pay tax only on that amount. If losses exceed gains, you can deduct up to $3,000 of the excess loss against ordinary income in that year, and carry forward any remaining losses to future years.

Do I report capital gains differently if I'm self-employed?

Capital gains are reported the same way regardless of employment status. However, self-employed people also pay self-employment tax (Social Security and Medicare) on business income, which capital gains do not trigger. This can make capital gains slightly more favorable than business income for high earners.

What's the difference between capital gains and dividends?

Capital gains are profits from selling an investment. Dividends are payments a company makes to shareholders from its earnings. may have access to dividends — those from U.S. companies held for more than 60 days — are taxed at the same long-term capital gains rates (0%, 15%, or 20%). Non-may have access to dividends are taxed as ordinary income.

Can I avoid capital gains tax by donating appreciated stock to charity?

Yes. When you donate appreciated stock directly to a may have access to charity, you avoid capital gains tax on the gain and receive a charitable deduction for the full fair market value. This is often more tax-efficient than selling the stock and donating the proceeds, especially for large gains.