What is the long-term capital gains tax? Here are the rates for 2025-2026

So you’ve made some money investing — or really any asset trade where you came out ahead. Congrats on the big score.

But don’t count your profits too quickly, because Uncle Sam wants his cut of your gains. If you’ve realized a profit on an investment in a taxable account, then you’ve earned a capital gain and you’ll have to pay tax on it. (If your gain was in a tax-deferred account, like an IRA, you don’t pay capital gains taxes; instead you owe ordinary income taxes when you withdraw your money.)

What you pay depends on your total income and how long you’ve held onto those assets. If you have a long-term capital gain — meaning you held the asset for more than a year — you’ll owe 0%, 15% or 20% in the 2024, 2025 and 2026 tax years.

Capital gains tax: The basics

Capital gains taxes are owed on the profits earned from the sale of assets such as stocks, real estate, businesses and other types of investments in non-tax-advantaged accounts. When you acquire assets and sell them for a profit, the U.S. government looks at the gains as taxable income.

In simple terms, the capital gains tax is calculated by taking the total sale price of an asset and deducting the original cost. Taxes are only due when you sell the asset, not during the period where you hold it.

There are various rules around how the Internal Revenue Service (IRS) taxes capital gains. For most investors, the main tax considerations are:

• How long you’ve owned the asset
• The cost of owning that asset, including any fees you paid
• Your income tax bracket
• Your marital status

Once you sell an asset, capital gains become “realized gains.” During the time you own an asset, they are called “unrealized gains,” and you won’t owe capital gains taxes if you don’t sell.

What’s considered a capital gain?

If you sell an asset for more than you paid for it, that’s a capital gain. For example, if you sell artwork, a vintage car, a boat, or jewelry for more than you paid for it, that’s considered a capital gain.

Property such as real estate and collectibles, including art and antiques, fall under special capital gains rules. These gains come with different and sometimes higher tax rates (discussed below).

And don’t forget that if you’ve sold cryptocurrency such as Bitcoin for a gain, then you’ll also be liable for capital gains taxes.

Capital gains tax: Short-term vs. long-term

Capital gains taxes are divided into two groups — short-term and long-term — depending on how long you’ve held the asset.

Here are the differences:

• Short-term capital gains tax applies to profits from selling an asset you’ve held for less than a year. Short-term capital gains taxes are paid at the same rate as you’d pay on your ordinary income, such as wages from a job.
• Long-term capital gains tax applies to assets held for more than a year. The long-term capital gains tax rates are 0%, 15% and 20%, depending on your income. For many taxpayers, these rates are much lower than the ordinary income tax rate.

Sales of real estate and other types of assets have their own specific form of capital gains and are governed by their own set of rules (discussed below).

What is the long-term capital gains tax rate?

While the capital gains tax rates have remained the same for years, the income required to qualify for each bracket goes up each year to account for workers’ increasing incomes. Here are the details on capital gains rates for the 2026, 2025 and 2024 tax years.

Long-term capital gains tax rates for 2026

Long-term capital gains tax rates for 2025

Long-term capital gains tax rates for 2024

For example, in 2025, a single filer won’t pay any tax on long-term capital gains if their total taxable income is $48,350 or less. But an individual filer with income between $48,350 and $533,400 would pay a 15% long-term capital gains tax rate. Or, if they had income above $533,400, they’d pay a 20% tax rate on their long-term capital gains.

In 2026, a single filer won’t pay any tax on long-term capital gains if their total taxable income is $49,450 or below. However, they’ll pay 15% on capital gains if their income is $49,451 to $545,500. Above that income level, the long-term rate jumps to 20%.

In addition, those capital gains may be subject to the net investment income tax (NIIT), an additional levy of 3.8% if the taxpayer’s income is above certain amounts. The income thresholds depend on the filer’s status (individual, married filing jointly, etc.) and are not adjusted for inflation.

What is the short-term capital gains tax rate?

Meanwhile, for short-term capital gains, the tax brackets for ordinary income taxes apply. The current ordinary income tax rates, in effect for 2024, 2025 and 2026, are 10%, 12%, 22%, 24%, 32%, 35% and 37%.

Unlike the long-term capital gains tax rate, there is no 0% rate or 20% ceiling for short-term capital gains taxes.

While capital gains taxes can be annoying, some of the best investments, such as stocks, allow you to skip the taxes on your gains as long as you don’t realize those gains by selling the position. You could hold your investments for decades and owe no taxes on those gains, until you sell.

How capital gains taxes work

If you buy $5,000 worth of stock in May and sell it in December of the same year for $5,500, you’ve made a short-term capital gain of $500. If you’re in the 22% tax bracket (based on your taxable income), you have to pay the IRS $110 of your $500 capital gains. That leaves you with a net gain of $390.

But if you hold on to the stock until the following December and then sell it, at which point it has earned $700, it’s a long-term capital gain. If your total income is $50,000 and you’re a single filer, then you’ll fall in the 15% bracket for that long-term capital gain. Instead of paying $110, you’ll pay $105, and see $595 worth of net profit instead.

Capital gains tax strategies

Use tax-advantaged retirement plans

Holding onto an asset for longer than a year could substantially reduce your tax liability due to favorable long-term capital gains rates. Other strategies include leveraging retirement accounts to delay paying capital gains taxes while maximizing growth.

For example, tax-advantaged accounts like a 401(k), traditional IRA, solo (401K) or SEP IRA allow your investments to grow tax-deferred. In most instances, you won’t incur capital gains taxes for buying or selling assets as long as you don’t withdraw funds (any money withdrawn from these types of accounts is generally taxed at ordinary income tax rates). This means that any potential taxes you might have owed the government can continue fueling your investments.

Other types of accounts like a Roth IRA or a 529 college savings plan are great options for building wealth without incurring capital gains. These long-term accounts are funded with after-tax money, and because of their tax structure, any potential capital gains grow tax-free. So, when the time comes to withdraw money for qualified expenses like retirement or college education, no federal income taxes are due on earnings or the initial investment.

Monitor your holding periods

When selling stocks or other assets in your taxable investment accounts, remember to consider potential tax liabilities.

With tax rates on long-term gains usually more favorable than short-term gains, monitoring how long you’ve held a position in an asset could lower your tax bill.

Holding securities for a minimum of a year ensures any profits on those investments are treated as long-term gains. For securities held less than a year, the IRS taxes those short-term gains as ordinary income. Depending on your tax bracket, any significant profits from short-term gains could bump you to a higher tax rate.

These timing strategies are important considerations, particularly when making large transactions. For the do-it-yourself investor, it’s never been easier to monitor holding periods. Most brokerage firms have online management tools that provide real-time updates.

Keep records of your losses

One strategy to offset your capital gains liability is to sell any underperforming securities, thereby incurring a capital loss. Realized capital losses could reduce your taxable income by up to $3,000 a year.

Additionally, when capital losses exceed that threshold, you can carry the excess amount into the next tax season and beyond.

For example, if your capital losses in a given year are $4,000 and you had no capital gains, you can deduct $3,000 from your regular income. The additional $1,000 loss could then offset capital gains or taxable earnings in future years.

This strategy allows you to rid your portfolio of any losing trades while capturing tax benefits.

There’s one caveat: After you sell investments, you must wait at least 30 days before purchasing similar assets. Otherwise, the transaction becomes a wash sale — a transaction where an investor sells an asset to realize tax advantages and purchases an identical investment soon after, often at a lower price. The IRS qualifies such transactions as wash sales, thereby eliminating the incentive.

Stay invested and know when to sell

Your income tax rate is a dominant factor when considering capital gains. By waiting to sell profitable investments until you stop working, you could significantly decrease your tax liability, especially if your income is low. In some cases, you might owe no taxes at all.

The same could be true if you retire early, leave your job, or your taxable income drastically changes. In essence, you can evaluate your financial situation each year and decide when the optimal time to sell an investment is.

Use a robo-advisor

Robo-advisors often employ tax strategies that you may miss or be unaware of (such as tax-loss harvesting). Using these services could help reduce the amount you pay in capital gains taxes compared with maintaining a strategy on your own.

For example, robo-advisors might identify investments that have gone down in value and could be used to reduce your tax burden. In tax-loss harvesting, investors strategically use investment losses to decrease tax liabilities.

In the digital age, robo-advisors provide low-cost automated investment planning tools using sophisticated algorithms. These machine-driven systems can uncover multiple scenarios for maximizing earnings while minimizing tax liabilities.

Speak with a tax professional

Federal and state tax laws are complex and ever-changing. A tax advisor who understands your financial situation and long-term goals can offer tailored strategies to maximize your income potential. Don’t discount the value of connecting with a tax expert for a personalized strategy. A tax advisor may be available through your personal financial advisor, if you have one.

Capital gains tax rate on real estate

What is the capital gains tax on property sales?

Again, if you make a profit on the sale of any asset, it’s considered a capital gain. With real estate, however, you may be able to avoid some of the tax hit, because of special tax rules.

For profits on your main home to be considered long-term capital gains, the IRS says you have to own the home and live in it for two of the five years leading up to the sale. In this case, you could exempt up to $250,000 in profits from capital gains taxes if you sold the house as an individual, or up to $500,000 in profits if you sold it as a married couple filing jointly.

If you’re just flipping a home for a profit, however, you could be subjected to a steep short-term capital gains tax if you buy and sell a house within a year or less.

25% capital gains rate for certain real estate

The rules differ for investment property, which is typically depreciated over time. In this case, a 25% rate applies to the part of the gain from selling real estate you depreciated. The IRS wants to recapture some of the tax breaks you’ve been getting via depreciation throughout the years on assets known as Section 1250 property. Basically, this rule keeps you from getting a double tax break on the same asset.

You’ll have to complete the worksheet in the instructions for Schedule D on your tax return to figure your gain (and tax rate) for this asset, or your tax software will do the figuring for you. More details on this type of holding and its taxation are available in IRS Publication 544.

If you’re considering a real estate investment, compare mortgage rates on Bankrate.

Small-business stock and collectibles: 28% capital gains tax rate

Two categories of capital gains are subject to a maximum 28% rate: small-business stock and collectibles.

If you realized a gain from qualified small-business stock that you held for more than five years, you generally can exclude one-half of your gain from income. The remaining gain may be taxed at up to a 28% rate. You can get the specifics on gains on qualified small-business stock in IRS Publication 550.

If your gains came from collectibles rather than a business sale, you’ll pay the 28% rate. This includes proceeds from the sale of:

• A work of art
• NFTs
• Antiques
• Gems
• Stamps
• Coins
• Precious metals
• Wine or brandy collections

Do you pay state taxes on capital gains?

In general, you’ll pay state taxes on your capital gains in addition to federal taxes, though there are some exceptions. Most states simply tax your investment income at the same rate they charge for earned income, but some tax capital gains differently.

Just nine states have no income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. (Washington does tax capital gains income for wealthy taxpayers.)

Of states that do levy an income tax, eight of them tax long-term capital gains less than ordinary income. These states include Arizona, Arkansas, Hawaii, Montana, New Mexico, North Dakota, South Carolina and Wisconsin. However, this lower rate may take different forms, including deductions or credits that reduce the effective tax rate on capital gains.

Some other states provide breaks on capital gains taxes only on in-state investments or specific industries.

Bottom line

Capital gains come due for anyone who makes a profit from selling assets such as stocks, real estate or other investments. You can reduce these taxes by holding onto assets for longer periods, using tax-advantaged retirement accounts and strategically timing sales. With the right strategies, you can minimize the impact of capital gains taxes and continue to grow your wealth.