Capital gains tax is what you pay when you sell an investment — stocks, bonds, real estate, crypto, or any other capital asset — for more than you paid for it. The profit is called a capital gain, and the tax rate depends on how long you held the asset.
The most important distinction in US capital gains tax is the holding period: assets held for more than one year qualify for the preferential long-term rates. Assets held for one year or less are taxed as ordinary income at your regular federal tax bracket — which can be as high as 37%.
| Rate | Single filer income | Married filing jointly |
|---|---|---|
| 0% | Up to $47,025 | Up to $94,050 |
| 15% | $47,026 – $518,900 | $94,051 – $583,750 |
| 20% | Over $518,900 | Over $583,750 |
Note: These thresholds apply to your total taxable income including the capital gain, not just the gain itself.
If your total taxable income (including the gain) falls within the 0% bracket, you pay zero federal capital gains tax on long-term gains. For a single filer with $30,000 in other income, you could realize up to $17,000 in long-term capital gains completely tax-free. This is one of the most underused tax planning opportunities available.
Higher-income investors also face the Net Investment Income Tax — an additional 3.8% surtax on net investment income. It applies when your Modified Adjusted Gross Income (MAGI) exceeds $200,000 for single filers or $250,000 for married filing jointly. This effectively raises the top long-term rate to 23.8% (20% + 3.8%).
Most states tax capital gains as ordinary income. California has the highest rate — up to 13.3% — and notably does not offer preferential rates for long-term gains. Nine states have no income tax and therefore no capital gains tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.