Long-term capital gains are profits from the sale of assets held for more than one year. These gains are taxed at preferential rates compared to short-term capital gains, which are taxed as ordinary income.
How Long-Term Capital Gains Are Taxed in the U.S.
- Tax Rates: For the 2025 tax year, long-term capital gains tax rates are 0%, 15%, or 20%, depending on your taxable income and filing status.
- Income Thresholds for 2025:
- Single filers:
- 0% on income up to $48,350
- 15% on income from $48,351 to $533,400
- 20% on income over $533,400
- Married filing jointly:
- 0% up to $96,700
- 15% from $96,701 to $600,050
- 20% over $600,050
- Married filing separately:
- 0% up to $48,350
- 15% from $48,351 to $300,000
- 20% over $300,000
- Head of household:
- 0% up to $64,750
- 15% from $64,751 to $566,700
- 20% over $566,700
- Single filers:
- Additional Tax: Gains may also be subject to a 3.8% Net Investment Income Tax (NIIT) if income exceeds certain thresholds.
- Comparison to Short-Term Gains: Short-term capital gains (assets held one year or less) are taxed at ordinary income tax rates, which range from 10% to 37%, depending on income
Summary
Long-term capital gains tax rates are designed to encourage holding investments for more than one year by taxing gains at lower rates than ordinary income. The exact rate you pay depends on your taxable income and filing status, with thresholds adjusted annually for inflation. The rates are 0%, 15%, or 20%, with possible additional NIIT for high earners
