Capital Gains Tax Rates: 2024 and 2025

Capital gains taxes are levied on profits from the sale of assets like stocks, mutual funds, and real estate. The rate at which these gains are taxed depends on your taxable income and how long you've held the asset. But keep in mind that capital gains tax rates are generally lower than the tax rates for ordinary income like wages.

Let's examine the 2024 rates for long-term capital gains (assets held for more than a year) and highlight the changes from last year's rates. We will also review the new IRS rates and threshold brackets for 2025.

Additionally, we will discuss short-term rates (ordinary income tax rates) and rates for specific capital gains tax situations, including those applicable to collectibles and the Net Investment Income Tax.

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Note: For a detailed overview of capital gains tax basics, see Kiplinger’s report: What is Capital Gains Tax?

Long term rates

Long-term capital gains tax rates

Long-term capital gains tax rates apply to assets held for more than a year. These rates are structured to encourage long-term investment.

The rates are 0%, 15%, or 20%, depending on your income level; essentially, the higher your income, the higher your rate. The income thresholds for long-term capital gains are adjusted annually for inflation.

If you compare the capital gains tax rates from 2023 and 2024 below, you can see the impact of inflation adjustments.

The 2024 capital gains tax rates have been adjusted upward, with thresholds increasing by about 5-6% across various filing statuses.

For instance, with single filers, the 0% rate now applies to incomes up to $47,025 in 2024, about a 5.4% increase from last year's threshold of $44,625.

The 20% rate threshold for single filers rose substantially from $492,300 last year to $518,900 for 2024.

For married couples filing jointly, the adjustments were similarly significant:

• The 0% rate threshold increased by 5.4%, from $89,250 in 2023 to $94,050 in 2024.
• The 20% rate threshold rose from $553,850 to $583,750.

Head of household filers also experienced notable changes:

• The 0% rate threshold increased by 5.4%, from $59,750 to $63,000.
• The 20% rate threshold jumped from $523,050 to $551,350

These inflation adjustments are designed to prevent "bracket creep," where taxpayers might be pushed into higher tax brackets due to inflation rather than actual increases in real income.

2024 Long-Term Capital Gains Tax Brackets

Planning ahead: 2025 Capital Gains Tax Rate Income Thresholds

The IRS has released the 2025 long-term capital gains income brackets. These represent an increase of about 2.8% from 2024 levels, which aligns with the inflation-adjusted tax brackets for 2025.

The thresholds are listed below, but for more information on the new numbers, see IRS Unveils 2025 Long-Term Capital Gains Tax Thresholds.

Short term rates

Short-term capital gains tax rates

Short-term capital gains are for assets held for one year or less. They are taxed at the same rates as ordinary income. As a result, depending on your taxable income and tax bracket, these rates range from 10% to 37%.

Like long-term capital gains, ordinary federal income tax rates are adjusted yearly for inflation. For information, see 2024 Federal Tax Brackets and Income Tax Rates.

Other considerations

Special capital gains tax rate situations

What is the 3.8% capital gains tax?

In addition to the capital gains tax, a 3.8% Net Investment Income Tax (NIIT) might apply to some taxpayers. This surtax is part of the Affordable Care Act and is sometimes called “the Medicare surtax.”

It applies to those with modified adjusted gross income (MAGI) above certain thresholds:

• $200,000 for single filers
• $250,000 for married couples filing jointly
• $125,000 for married individuals filing separately

Net investment income includes taxable interest, dividends, capital gains, passive rents, annuities, and royalties. The surtax is calculated using Form 8960.

For more information, see Medicare Tax: Five Things Every Worker Needs to Know, and What is Net Investment Income Tax and Who Pays?

Collectibles tax rate: Are collectibles always taxed at 28%?

Gains from selling collectibles (art, antiques, precious metals, etc.) are taxed at a maximum rate of 28%. This rate only affects long-term gains; short-term gains from collectibles are taxed as ordinary income.

Note: For this special rule, the IRS says a "collectible" can be antiques, a work of art, a stamp, a coin, a bottle of wine or other alcoholic beverage, gold or other precious metal, a gem, a historic object, or another similar item.

If you sell an interest in a partnership, S corporation, or trust, any gain from that sale attributable to the unrealized appreciation in the value of collectibles is also treated as gain from the sale of collectibles.

For more information, see Kiplinger's report Here's How Collectibles Are Taxed.

Capital gains tax rate for Qualified Small Business Stock

Some or all of your gain may be tax-free for qualified small business stock (QSBS) held for at least five years. For the remaining gains, a maximum tax rate of 28% applies. (This doesn't affect short-term gains taxed at ordinary income rates.)

As with the 28% rate for collectibles, if your ordinary tax rate is below 28%, that rate will apply to taxable QSBS gain.

Capital gains tax rate for depreciation

If you sell real estate with previously claimed depreciation deductions, you might face a capital gains tax of up to 25% on the unrecaptured depreciation.

Note: This taxable amount is known as "unrecaptured Section 1250 gain" (named after the tax code section covering gain from the sale or other disposition of certain depreciable real property).

• The rest of the long-term gain is taxed at standard long-term rates.
• The 25% rate applies only to long-term gains.

Capital gains tax rates: Bottom line

Understanding capital gains tax rates is important for financial planning. If you expect significant gains from investments, it's a good idea to calculate your potential tax liability and plan accordingly.

Additionally, stay informed about annual changes in tax rates and thresholds to make the most of your investments.

Planning can help minimize your potential tax liability while you maximize your returns.

Related

• The Wash Sale Rule: 5 Things to Know
• How the IRS Taxes Your Collectibles
• Capital Gains Tax Exclusion for Homeowners: What to Know
• States With Low and No Capital Gains Tax