What Could Happen to Capital Gains Tax Rates in 2025

Capital gains tax rates are not changing automatically in 2025, but Congress could pass new legislation that would alter them

No law currently scheduled to take effect in 2025 will raise or lower your capital gains tax rate. The rates that exist now — 0%, 15%, and 20% for long-term gains, depending on your income — remain in place unless Congress votes to change them. However, several proposals have been discussed in Congress that could affect capital gains taxation starting in 2025 or later years, and the outcome depends on which bills pass and when.

The most significant uncertainty comes from the expiration of provisions in the Tax Cuts and Jobs Act of 2017. That law lowered tax rates across the board, including capital gains rates. Those lower rates are set to expire on December 31, 2025, unless Congress extends them. If Congress does nothing, capital gains rates would revert to their pre-2017 levels on January 1, 2026 — not 2025. This means 2025 itself would still use the current rates, but the change could come at the very end of the year.

Key Takeaways

• Capital gains tax rates do not automatically change in 2025; they remain at 0%, 15%, and 20% for long-term gains unless Congress passes new legislation.
• Tax provisions from the 2017 Tax Cuts and Jobs Act expire on December 31, 2025, which could trigger rate increases on January 1, 2026, if Congress does not extend them.
• Several proposals in Congress would change capital gains taxation, but none have become law, and their passage and timing are uncertain.
• Your actual tax bill depends on your income level, how long you held the asset, and whether you have other income or losses to offset gains.

What Congress has proposed for capital gains taxation

Multiple bills have been introduced in recent years that would affect how capital gains are taxed, though none have passed into law. Some proposals would raise rates on high earners, while others would change the rules for how gains are calculated or when they are taxed.

One frequently discussed proposal would tax capital gains as ordinary income for people with very high incomes — typically those earning over $1 million per year. Under current law, even wealthy people pay only 20% on long-term capital gains, while their ordinary income might be taxed at 37%. A proposal to equalize these rates would mean some high-income earners would pay significantly more on investment gains. However, this proposal has not passed Congress.

Another category of proposals would change the "step-up in basis" rule, which allows heirs to inherit assets at their current market value rather than the original purchase price. This means if someone buys stock for $10,000 and it grows to $100,000 before they die, their heirs inherit it valued at $100,000 and owe no capital gains tax on that $90,000 gain. Proposals to limit or eliminate this rule would affect estate planning and inheritance taxation, but again, no such change has become law.

The 2025 tax year itself: what stays the same

For the 2025 tax year — income you earn and gains you realize between January 1 and December 31, 2025 — the current capital gains rates explore. Long-term capital gains (assets held more than one year) are taxed at 0%, 15%, or 20% depending on your total taxable income and filing status. Short-term capital gains (assets held one year or less) are taxed as ordinary income at rates ranging from 10% to 37%.

The income thresholds that determine which rate you pay also remain the same for 2025. For example, for single filers in 2025, the 15% rate applies to long-term gains if your taxable income falls between roughly $47,000 and $518,000 (these numbers are adjusted annually for inflation). The exact thresholds vary by filing status and are published by the IRS each year.

If you sell an investment in 2025, your tax bill will be calculated using these current rates and thresholds. The uncertainty about future changes does not affect how you are taxed on 2025 transactions.

What could change on January 1, 2026

The most concrete change that could happen — without any new legislation — is the expiration of the 2017 tax cuts on December 31, 2025. If Congress does not extend these provisions, capital gains rates would increase on January 1, 2026. The 15% rate would rise to 20%, and the 20% rate would rise to 23.8% (which includes the 3.8% net investment income tax). The 0% rate would also disappear.

However, Congress has extended these provisions multiple times since 2017, and it may do so again. The timing and outcome are not certain. Congress typically addresses tax extenders in the final weeks of a year, sometimes retroactively. This means the rules for 2026 might not be finalized until late 2025 or even early 2026.

Any other changes to capital gains taxation — such as new rates for high earners or changes to the step-up in basis — would only take effect if Congress passes a bill and the President signs it. The timing of such legislation is unpredictable and depends on the political composition of Congress and the administration's priorities.

How to plan when the rules are uncertain

If you are considering selling an investment and are concerned about tax changes, you have a few options. One is to realize the gain in 2025 while the current rates are in effect, locking in your tax bill under known rules. Another is to wait and see whether Congress extends the current rates or passes new legislation. A third is to consult a tax professional who can model your specific situation under different scenarios.

Keep in mind that tax rate changes are only one factor in deciding when to sell. The value of the asset itself, your overall financial situation, and your investment goals matter more than trying to time a tax change. Selling an investment solely to avoid a potential future tax increase can backfire if the asset continues to grow or if the tax change never happens.

You can also use tax-loss harvesting — selling investments at a loss to offset gains elsewhere — regardless of what rates are in effect. This strategy works under current law and would continue to work under most proposed changes.

State and local capital gains taxes

Federal capital gains tax is only part of your total tax bill. Some states also tax capital gains, either as part of ordinary income or as a separate tax. Washington, Illinois, and California have enacted capital gains taxes in recent years, though the details and rates vary. If you live in one of these states or are considering moving, state capital gains taxes may affect your planning more than federal changes.

State tax rules are separate from federal rules and change on their own schedule. A change to federal capital gains tax does not automatically trigger changes at the state level, and vice versa.

Frequently Asked Questions

Will my capital gains tax rate definitely go up in 2026?

Not necessarily. The 2017 tax cuts expire on December 31, 2025, which would raise rates on January 1, 2026, unless Congress extends them. Congress has extended these provisions before and may do so again. The outcome is uncertain and depends on legislative action.

If I sell stock in 2025, what rate will I pay?

You will pay the current long-term capital gains rate of 0%, 15%, or 20%, depending on your income level and filing status. Short-term gains are taxed as ordinary income. The rate depends on how long you held the stock and your total taxable income for the year.

What is the step-up in basis, and could it change?

The step-up in basis allows heirs to inherit assets at their current market value, avoiding capital gains tax on appreciation that occurred during the original owner's lifetime. Proposals to limit or eliminate this rule have been introduced in Congress but have not passed. If you are concerned about inheritance tax planning, consult a tax or estate professional.

Do state capital gains taxes follow federal changes?

No. State and federal capital gains taxes are separate. Some states have their own capital gains taxes with different rates and rules. Changes to federal law do not automatically change state law, and you may owe both federal and state capital gains tax depending on where you live.

Should I sell investments now to lock in the current tax rate?

That depends on your specific situation, including the asset's value, your overall financial goals, and your tax picture. Selling solely to avoid a potential future tax increase can be costly if the asset continues to grow or if the tax change does not happen. A tax professional can help you weigh the trade-offs.