What Happened to Capital Gains Tax Rates in 2024

Capital gains tax rates did not change in 2024

The federal capital gains tax rates that were in place at the start of 2024 remained the same through the end of the year. If you sold an investment at a profit in 2024, you paid tax at one of three rates — 0%, 15%, or 20% — depending on your income level and filing status. No new law changed these rates during 2024.

What did change in 2024 were the income thresholds that determine which rate applies to you. The IRS adjusts these thresholds every year for inflation. For example, the threshold between the 15% and 20% rates moved higher in 2024 than it was in 2023, meaning more income could be taxed at the lower 15% rate before hitting the 20% bracket.

State capital gains taxes, however, vary widely. Some states have no capital gains tax at all, while others tax investment gains as ordinary income. A few states, like Washington and California, have introduced or modified capital gains taxes in recent years, but these are separate from federal rates and change on their own schedules.

Key Takeaways

• Federal capital gains tax rates stayed at 0%, 15%, and 20% throughout 2024 with no legislative changes.
• The income thresholds that determine which rate applies to you increased in 2024 to account for inflation.
• Your capital gains tax rate depends on your total income for the year and your filing status, not on how long you held the investment alone.
• State capital gains taxes operate independently from federal rates and vary significantly by location.
• Tax rates for 2025 and beyond remain uncertain and depend on future congressional action.

How the three federal capital gains rates work

Long-term capital gains — profits from investments you held for more than one year — are taxed at preferential rates. The 0% rate applies to lower-income filers. The 15% rate applies to middle-income filers. The 20% rate applies to the highest earners. These are the only three federal rates for long-term gains.

Your income level determines which rate applies. For 2024, a single filer paid 0% on long-term gains as long as their total taxable income stayed below $47,025. Income between $47,025 and $518,900 was taxed at 15%. Income above $518,900 was taxed at 20%. For married couples filing jointly, the thresholds were higher: 0% up to $94,050, then 15% up to $583,750, then 20% above that.

These thresholds are different from your ordinary income tax brackets. You can be in the 22% tax bracket for wages but still pay only 15% on capital gains if your total income falls in the 15% capital gains bracket. The IRS publishes new thresholds each year, and they shift upward slightly to reflect inflation.

What changed in 2024 versus 2023

The rates themselves — 0%, 15%, and 20% — were identical in 2024 and 2023. The change was in the income ranges where each rate applied. Because inflation was lower in 2023 than in prior years, the 2024 adjustments were also smaller than they had been.

For a single filer, the top of the 0% bracket moved from $44,625 in 2023 to $47,025 in 2024. The top of the 15% bracket moved from $492,300 to $518,900. For married couples filing jointly, the 0% bracket went from $89,250 to $94,050, and the 15% bracket topped out at $583,750 instead of $553,850.

These adjustments matter if you are close to a bracket boundary. Someone with $500,000 in taxable income would have paid 20% on gains above $492,300 in 2023, but only 15% on gains up to $518,900 in 2024. That same person's tax bill on the same gains would have been lower in 2024 purely because of the inflation adjustment.

Why rates stayed the same even though Congress did not act

The 0%, 15%, and 20% rates for long-term capital gains were set by the Tax Cuts and Jobs Act of 2017. That law did not expire in 2024. Unless Congress passes a new law to change the rates, they remain in effect. No such law passed in 2024.

The income thresholds, by contrast, adjust automatically every year. The IRS calculates the adjustment based on inflation data from the prior year. This happens without any congressional action — it is a built-in feature of the tax code. The rates themselves require an act of Congress to change.

Many proposals have circulated in Congress to raise capital gains tax rates, particularly on very high earners. None of these proposals became law in 2024. Whether rates change in the future depends on which bills Congress considers and whether they pass both chambers and receive presidential approval.

State capital gains taxes and how they differ from federal rates

Nine states have no income tax at all and therefore no capital gains tax: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire (which taxes only investment income, not wages). In these states, you owe no state tax on capital gains, though you still owe federal tax.

Most other states tax capital gains as ordinary income, meaning your gains are added to your wages and taxed at your state's regular income tax rate. That rate varies by state and by income level within each state. A few states have created separate capital gains tax rates or brackets.

Washington and California are notable examples. Washington enacted a 7% capital gains tax on long-term gains over $250,000, effective in 2022. California taxes capital gains as ordinary income but has proposed a separate 13.3% tax on gains over $1 million. These state taxes operate independently from federal rates and change on their own schedules. Your total capital gains tax bill is the sum of federal tax plus whatever your state charges.

What could change capital gains tax rates in the future

The current federal rates expire at the end of 2025 unless Congress extends them. If no action is taken, the rates would revert to the pre-2017 structure: 0%, 15%, and 20% would become 0%, 15%, and 20% for most filers, but the income thresholds would change significantly. However, Congress has extended these rates multiple times before, and predicting future action is not possible based on current law alone.

Proposals to raise capital gains tax rates have been introduced in various congressional sessions. Some would increase the top rate to 28% or higher. Others would tax capital gains as ordinary income for very high earners. None of these became law in 2024, and there is no certainty any will pass in future years.

If you are planning a large investment sale, it is worth checking the current tax code and consulting a tax professional about your specific situation. Tax rates and thresholds can change, and the timing of a sale can affect your tax bill. A professional can help you understand how a sale would be taxed under current law and what alternatives might be available to you.

How to find your 2024 capital gains tax rate

Start by calculating your total taxable income for 2024. This includes wages, interest, dividends, and capital gains. Add up all these sources. Then compare that total to the income thresholds for your filing status.

If your total taxable income falls below $47,025 (single) or $94,050 (married filing jointly), your long-term capital gains are taxed at 0%. If it falls between those amounts and the next threshold, your gains are taxed at 15%. If it exceeds the top threshold, your gains are taxed at 20%.

Keep in mind that capital gains are added to your other income to determine which bracket you fall into. If you earned $40,000 in wages and realized $10,000 in capital gains, your total taxable income is $50,000. For a single filer, that puts you in the 15% capital gains bracket because $50,000 exceeds $47,025. You would owe 15% tax on the $10,000 gain, or $1,500.

Frequently Asked Questions

Did capital gains tax rates go up in 2024?

No. The federal rates remained 0%, 15%, and 20% throughout 2024. The income thresholds where each rate applies increased slightly due to inflation, but the rates themselves did not change. No new law was passed to alter the rates.

What happens to capital gains tax rates after 2025?

The current rates are set to expire at the end of 2025 unless Congress extends them. If no action is taken, the rates would technically revert to prior law, though the exact outcome depends on what Congress does. Many expect Congress to extend the current rates, but this is not certain.

Do I owe capital gains tax on every investment I sell?

You owe tax only on gains — the profit you made. If you sell an investment for less than you paid for it, you have a loss and owe no tax on that sale. Gains from investments held one year or less are taxed as ordinary income at higher rates than long-term gains.

How do state capital gains taxes affect my federal tax bill?

They do not. State and federal taxes are separate. You owe federal tax based on federal rates and thresholds, and you owe state tax based on your state's rules. Your total tax bill is the sum of both. Some states have no capital gains tax, while others tax gains as ordinary income or have separate capital gains tax rates.

Can I reduce my capital gains tax by timing when I sell?

Possibly. If you are close to a tax bracket threshold, selling in a year when your other income is lower might result in a lower tax rate on your gains. Similarly, realizing losses in the same year as gains can offset the gains and reduce your tax bill. A tax professional can help you evaluate whether timing makes sense for your situation.