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The capital gains tax is what you’ll owe the government for your profit on the sale of an asset such as a home or stocks.
Here’s what you need to know about the capital gains tax, including the rates for 2025 and the difference between short-term and long-term gains.
What is the capital gains tax?
Let’s start at the beginning. What are capital gains?
Capital gains refer to any profit you make from acquiring an asset at one price and selling it at a higher price. It does not refer to any profits you have on paper – that is, if you bought a stock and its value went up.
It’s a fairly straightforward concept, but as with everything related to the tax code there are lots of nuances that can make it more complicated.
Long-term capital gains vs. short-term
A short-term capital gains tax is levied on the profits of investments that were sold after being held for a year or less. They are taxed at the same rate as your income. Check the IRS tax brackets to determine the tax you pay for each portion of your income.
Long-term capital gains tax is applied to investments that have been held for over a year before being sold for a profit. They are generally taxed at a lower rate than short-term gains are. For 2025 tax filings, the most you may expect to pay is 20%.
What qualifies for capital gains tax?
Capital gains taxes are not exclusive to the stock market. Anything considered a “capital asset” – that is, any investment that could rise in value and create a profit – is taxable.
Capital gains tax applies to:
* Real estate
* Bonds
* Mutual funds (but usually not ETFs)
* NFTs/cryptocurrency
* Jewelry/coin collections
What are the 2025 capital gains tax rates?
The amount you are taxed on capital gains depends on how long you have held a certain capital asset (whether it’s a long-term gain or a short-term one) and your income (what tax bracket you fall in.) The higher your income, the more you will have to pay in capital gains taxes.
For short-term gains, you can follow the regular guide for income tax to see how much you will pay for profits. The long-term capital gains tax rates for the 2025 tax year remain at 0%, 15%, or 20%.
The rate is 0% for:
* Unmarried individuals filing separately with a taxable income less than or equal to $49,450.
* Married filing jointly with a taxable income less than or equal to $98,900.
* Married filing separately with a taxable income less than or equal to $49,450.
* Head of household with a taxable income less than or equal to $66,200.
The rate is 15% for:
* Unmarried individuals filing with a taxable income between $49,451 and $545,500.
* Married filing jointly with a taxable income between $98,901 and $613,700.
* Married filing separately with a taxable income between $49,451 and $306,850.
* Head of household with a taxable income between $66,201 and $579,600.
