What Are the Long Term Capital Gains Tax Income Brackets?
Your long-term capital gains tax rate depends on more than just your profit. Learn how your total income fits into the tax structure to determine your liability.
When you sell an asset for a profit, that profit is known as a capital gain. A long-term capital gain results from selling an asset you have held for more than one year and is subject to different tax rates than ordinary income like your salary. This treatment is designed to encourage long-term investment. How these gains are taxed depends on specific income thresholds set by the government, which determine the rate applied to your gain.
Determining Your Long-Term Capital Gain
Before you can determine the tax, you must calculate the gain. The foundation of this process is the holding period, which is the length of time you own an asset. To qualify for long-term capital gains tax rates, you must own the asset for more than one year. If held for one year or less, the profit is a short-term capital gain and is taxed at your regular income tax rates.
The gain or loss is found by taking the proceeds from the sale and subtracting the asset’s adjusted cost basis. The “cost basis” is what you originally paid for the asset, including commissions or fees. This cost is then “adjusted” over time to reflect certain events.
An asset’s basis can be increased by costs like acquisition fees or capital improvements. For example, if you buy a rental property and install a new roof, the cost of the roof increases your adjusted basis. Conversely, the basis can be decreased by items like depreciation deductions you’ve claimed on a business or rental asset.
The Long-Term Capital Gains Tax Brackets
The federal tax system applies three main rates to most long-term capital gains: 0%, 15%, and 20%. The rate that applies to your gain is determined by your total taxable income for the year, which includes wages, business income, and other ordinary income. The income thresholds for these rates are adjusted annually for inflation and vary based on your tax filing status.
For the 2024 tax year (taxes filed in 2025), the income thresholds for the long-term capital gains rates are as follows:
| Filing Status | 0% Rate | 15% Rate | 20% Rate |
| :— | :— | :— | :— |
| Single | Up to $47,025 | $47,026 to $518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,051 to $583,750 | Over $583,750 |
| Head of Household | Up to $63,000 | $63,001 to $551,350 | Over $551,350 |
The capital gains tax brackets are applied progressively, meaning they are stacked on top of your ordinary income. You first determine how much of your income is from ordinary sources like a salary. Your long-term capital gains then begin to fill the capital gains tax brackets, starting with the 0% bracket, only after your ordinary income has been accounted for.
If the gain is large enough, it will fill the 0% bracket and spill over into the 15% bracket. Any portion of the gain that exceeds the top of the 15% bracket threshold will be taxed at the 20% rate. This stacking mechanism ensures that the tax is calculated based on your complete income picture.
Calculating the Tax Liability
To illustrate, consider a taxpayer who files as Single for the 2024 tax year. This individual has $40,000 of ordinary income from a salary and realized a long-term capital gain of $70,000 from selling stock.
First, we account for the ordinary income. The $40,000 salary uses up the first $40,000 of the taxpayer’s available income space in the tax brackets.
Next, we determine how much “room” is left in the 0% capital gains bracket. For a Single filer in 2024, the 0% bracket extends up to $47,025 of taxable income. With $40,000 of ordinary income already accounted for, there is $7,025 of space remaining in this bracket. The first $7,025 of the capital gain is therefore taxed at 0%.
The subsequent portion of the gain is taxed at the 15% rate. After using $7,025 of the gain to fill the 0% bracket, there is a remaining gain of $62,975. Since this amount falls entirely within the 15% bracket’s range for a Single filer, it is all taxed at 15%. This results in a tax of $9,446.25 ($62,975 x 0.15).
Because the entire gain has now been accounted for, no portion of it reaches the 20% bracket. The total long-term capital gains tax liability is $9,446.25.
Special Considerations for Capital Gains
High-income taxpayers may be subject to the Net Investment Income Tax (NIIT). This is an additional 3.8% tax on the lesser of either your net investment income or the amount by which your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds. For 2024 and 2025, these MAGI thresholds are $200,000 for Single and Head of Household filers and $250,000 for Married Filing Jointly.
Higher tax rates apply to certain types of assets. One common exception is for the sale of collectibles, such as art, antiques, or precious metals, which are taxed at a maximum rate of 28% if held for more than one year. Another exception is the 25% rate that applies to the portion of a gain from selling real estate known as “unrecaptured Section 1250 gain,” which is related to depreciation you previously deducted on the property.
Most states also impose their own income taxes, and many of them tax capital gains. The rules and rates vary widely, with some states taxing capital gains as ordinary income, some offering their own rates, and a few having no state income tax. Taxpayers must account for both federal and any applicable state tax laws when selling an asset.