There are two capital gains tax categories - short term and long term.
Long term investments pay less in taxes - these are investments that you typically hold for longer than one year.
Short term investments are taxed at your regular income rate.
Let's break down what the capital gains tax brackets look like, the income cut-offs, and more below. You can see how these compare to the regular Federal tax brackets here.
If you're still deciding on how to file your taxes this year, check out TurboTax. Take action now with TurboTax and get your taxes done. Check out TurboTax here.
What Are Capital Gains?
When you sell a stock for a profit, you realize a capital gain. Basically, when most assets are sold for a profit, a capital gain is generated. Profits or gains are taxable. How much you’ll pay depends on a number of factors, including the current tax brackets, which change periodically.
Personal assets and investments are called capital assets. This includes your home, car, investments, recreational vehicle, and more. IRS Topic Number 409 covers these items in more detail. A capital gain or capital loss is based on the difference between the asset sale price and your adjusted basis, which is referenced in IRS Publication 551.
2019 Capital Gains Tax Brackets
There are two main categories for capital gains: short- and long-term. Short-term capital gains are taxed at your ordinary income tax rate. Long-term capital gains are taxed at only three rates: 0%, 15%, and 20%.
Short-Term Capital Gains Rates
Tax rates for short-term gains are 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Short-term gains are for assets held for one year or less - this includes short term stock holdings and short term collectibles.
Short Term Capital Gains Tax Brackets | |||
|---|---|---|---|
Tax Bracket/Rate | Single | Married Filing Jointly | Head of Household |
10% | $0 - $9,700 | $0 - $19,400 | $0 - $13,850 |
12% | $9,701 - $39,475 | $19,401 - $78,950 | $13,851 - $52,850 |
22% | $39,476 - $84,200 | $78,951 - $168,400 | $52,851 - $84,200 |
24% | $84,201 - $160,725 | $168,401 - $321,450 | $84,201 - $160,700 |
32% | $160,726 - $204,100 | $321,451 - $408,200 | $160,701 - $204,100 |
35% | $204,101 - $510,300 | $408,201 - $612,350 | $204,101 - $510,300 |
37% | $510,301+ | $612,351+ | $510,301+ |
Long-Term Capital Gains Rates
Just like short-term gains, there are four filing categories: single, married and filing jointly, head of household, and married and filing separately. The amount of taxes paid is based on income.
Long-term gains are those on assets held for over a year. Below, the percentage of taxes paid are listed on the left with the corresponding income on the right.
Long Term Capital Gains Tax Brackets | |||
|---|---|---|---|
Tax Bracket/Rate | Single | Married Filing Jointly | Head of Household |
0% | $0 - $39,375 | $0 - $78,750 | $0 - $52,750 |
15% | $39,376 - $434,550 | $78,751 - $488,850 | $52,751 - $461,700 |
20% | $434,551+ | $488,851+ | $461,701+ |
Net Investment Income Tax (Medicare Tax)
The Net Investment Income Tax (NIIT) or Medicare Tax applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts.
In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer
Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds:
Net Investment Income Tax | |
|---|---|
Filing Status | AGI Threshold Amount |
Single | $200,000 |
Married Filing Jointly | $250,000 |
Married Filing Separately | $125,000 |
Head Of Household | $200,000 |
Qualifying Widower with Dependent Child | $250,000 |
Collectible Long Term Capital Gains Rate
Collectibles held over one year are always taxed at 28%.
Collectibles include gold and silver, art work, rare coins, antiques, and more.
Calculating Capital Gains and Losses
While you can have a capital gain from the profitable sale of an asset, you can also have a capital loss from the sale of an asset below your purchase price or adjusted basis.
As an example, say you buy and sell stock in the same year up to November. Your trading has netted $10,000 in profits. These profits are classified as short-term gains because they’re less than a year old. Then in December of the same year, you sell more stock for a loss of $3,000. Your capital gain is reduced to $7,000.
A different investor buys and sells some stock during a year and manages to lose $5,000. This investor has a capital loss of $5,000 but can only declare $3,000 ($1,500 if married filing separately) for the current year. What happens to the remaining $2,000?
The $2,000 capital loss in the previous example is carried over to the next year. It can be applied as a capital loss. Using another example, our investor has a capital gain of $10,000 in the next year. They can offset this gain and reduce their taxes by the amount carried over from the previous year: $2,000. Their new capital gain is then $8,000.
Unlike ordinary income, capital gains are flat taxed since the tax is just calculated once. You can see this in the tax brackets section above. If you are single and make a $45,000 capital gain, your long-term capital gains tax bracket is 15%. You will then pay $6,750 ($45,000 x 0.15) in taxes on this gain.
How to Reduce Your Taxes
Nobody likes paying taxes and everyone is looking for ways to reduce them. There are a few ways that you can reduce your capital gains taxes.
Keeping Investments for at Least a Year
If you hold investments for at least a year before selling, you’ll be able to take advantage of long-term gains.
Use a Robo-Advisor
Robo-advisors have become very popular. While they haven’t yet replaced financial advisors, for most people, they can help save on taxes.
Robo-advisors use a method called tax-loss harvesting. By selling losers, gains on winners are offset. Of course, you can perform tax-loss harvesting manually. However, robo-advisors make this task easy through the use of automation.
It seems there is nowhere to hide from taxes. But arming yourself with knowledge about capital gains taxes can help you save money. We’ve already seen a few practical tips. Your accountant is likely to have more. Ask your accountant questions throughout the year so you can set yourself up for maximizing capital gains tax reductions.
will chambers says
Based on your Long-term capital gains table, can I confirm that the tax is not graduated, as are income taxes?
Stated in a different manner; A person will pay LTCG tax on his/her entire LTCG at the rate in which their income falls within the cited income bands.
Ex: Tax payer’s income = $100k. All LTCG will be taxed at 15%.
Robert Farrington says
Short answer – LTCG are “flat”, meaning you will pay basically either 15% or 20% on the entire amount of the gain based on your bracket.
Long answer – it’s not a flat tax, just a flat calculation in the sense that it’s only done at the end of the year as opposed to the ordinary income that is calculated throughout the year. The calculation itself is graduated like the ordinary income but not based on what you make at the time of sales (like how your paycheck pushes your withholding higher as the year goes on, you don’t calculate CG tax with each sale).
But like anything it’s hard to make accurate calculations with generic numbers and no context because of the way the split is handled with CG/Ordinary income tax plus the other things that go into the taxable income calculation.
Jon says
This is my questions also…
If I can hold our (married filing joint) ordinary income under $78,750 for all of 2019, then I can sell a rental property with $500,000 gain and pay zero in LTCG?
Robert Farrington says
That’s not how it works, because your gain will be factored into your income calculation.
With residential real estate rentals you also have depreciation recapture, there’s a lot that goes into it. You’ll either be at 15% or 20% depending on what the final number is for the capital gain portion, plus you’ll have depreciation recapture which is taxed at the ordinary tax rate and this can be significantly higher (probably either 24% or 32% for you).
SF says
Question the “Long Term Capital Gains Tax Brackets.”
Does the income for each bracket include the income from a LT Cap Gain or not?
For example, if a married couple has $100,000 in W-2 Wages, Dividends, and Interest and another $500,000 in stock Long Term capital Gains, does the $500,000 get taxed at 15% or 20%?
Robert Farrington says
Since your gain is $500,000, the rate is always 20%. You’ll also have the NIIT on that amount.
Capital gains are based on your taxable income, including the gain. So a big gain could push you into a higher bracket (which is does in your example).
Stephen c Pattinson says
In retirement, I plan to pull down 4% p.a from my investments. I need a total drawdown per year of $100,000, of which my long term capital gain is say 25% ie $25,000. Am I right in saying that I pay no tax because the LTCG is less than the Married Filing Jointly threshold of $78,750 ?
Robert Farrington says
What kind of investment account. Remember, withdrawals from a traditional IRA are treated as ordinary income (see the regular tax brackets), Roth IRA withdrawals are tax free, and traditional taxable accounts use the tables above.
Barry Harvey says
Wife and I have 75,000 AGI, w2 income. Our tax rate is 12%. If we sell real estate (commercial not home) and make 70,000 LTCG are we taxed at 0% on LTCG and report only the 75,000?
Robert Farrington says
You would be taxed at 15% on the sale. You add $75k W2 income + $70k LTCG = $145k income. Your W2 income is taxed at 12% but the LTCG would be in the 15% bracket. And it would be a flat 15% on the gain – so you’d owe $10,500 in taxes on the sale alone (not counting other taxes you may owe).
P.S. For pretty much everything money-wise, yoou always report everything even if you’re not taxed on it.
Mai says
Thank you for the information. How does this fit in with taxes paid on 1256b contracts? Thanks.
Robert Farrington says
Section 1256 futures contracts are marked to market at the end of each year. Then, it’s taxed 60% on the long term capital gains rate, and 40% on the short term capital gains rate you’d pay.
So, use the tables above, find your long term and short term gain rate – then divide your gain 60/40 and do the math.
Jason says
My wife and I make apprx $77k combined and file joint. How much LTCG’s can we make until we cross the threshold from 0% into the 15% capital gains rate? I calculate it to be $25,750…is that correct? Thank you in advance.
Robert Farrington says
For filing jointly, the cutoff is $78,749 before you hit the 15% LTGC bracket. So, it really depends on what deductions you take and what your AGI is. You should speak to a tax professional who knows your situation.
Mike says
Does age play any part in this? My wife and I are 51 and 52 y.o., and have approximately $250k in AGI. If we were to sell stock we’ve had for more than one year, which has approximately $75k of LTCG, would we still fall in the 15% LTCG tax bucket?
Robert Farrington says
Age plays no part. Just income.
Margaret says
If I sell a property/business and use part of the money to pay off another property, will I still have to pay LTCG on the full amount of the original sale of the property/business or just what’s left after paying off the other property?
Robert Farrington says
No, what you do with the money doesn’t impact the taxes you pay. You can, potentially, do a 1031 exchange – where you buy a like-kind asset. However, that would be a new purchase (not paying down the mortgage on an existing property) and there are many other nuances if you go down that route. You should contact a tax professional.
Terry Jones says
I want to gift $10,000 to each of my 3 children. If I withdraw $30k from a long-term non-retirement account is the withdrawal taxed as ordinary income or as a gift? I believe legitimate gifts are tax free up to $14k.
Robert Farrington says
The gift won’t impact your estate at all – it’s all about where the money is coming from. Is the $30,000 just sitting in cash? If so, you don’t have any type of sale, so it’s no different than sending it from your checking account.
Were you planning on selling an investment to get that $30,000? If so, you’ll pay taxes on any gains – which could be nothing if you are breaking even or losing money, or it will be the difference of what you paid versus what you sold it for.
As a third approach, you could always give them the investment directly without selling it – and then the taxes would be your children’s issue when they go to sell. Read this: https://www.kiplinger.com/article/taxes/T055-C001-S003-taxes-on-a-gift-of-stock.html
Duncan Mackintosh says
My daughter owes 100k for her masters. She is employed but we would like to help her out. Should we stick to 14K maximum gift per year or pay it all off?
Robert Farrington says
How generous! The gift tax is a bit complicated and this article is about capital gains taxes. Are you selling an asset to provide the gift? If so, you’ll owe capital gains on that sale. If you just have it in cash, this article doesn’t apply.
The gift tax has a gift tax exclusion of $15k per person per year. So, if you’re married, you and your wife can each gift your daughter $15k (for a total of $30k) without any concern.
If you want to do the $100k at once, you’ll have to file a gift tax form and it could make your taxes more complicated in the future. If you go this route, you should consult a tax professional that can walk you through your situation.
CTH says
Will Long Term Capital Gains Tax Brackets consider Foreign Earn Income Exclusion? For example, If I work abroad and annual wedge is $100k (2019 FEIE is $105,900). This year my LTCA is $30k. Will LTCA Bracket in 0% or 15%?
Robert Farrington says
We’re not experts on the specifics o foreign earned income exclusion, but this may help you: https://www.greenbacktaxservices.com/blog/capital-gains-and-losses-on-your-expat-tax-return/
Katherine Osborne says
My husband and I are considering selling a rental property in 2019. Original cost basis was $110, 164 and depreciation taken is $78, 237. I am trying to figure tax impact if I sell for $300,000 possibly up to 400 000.
I don’t understand if I use AGI or taxable income in my calculations. Our 2019 ordinary income will be basically the same as 2018. Our AGI for 2018 was $82,621 and taxable income for 2018 was $55,827.
Which figure do I use to determine if we will be in the 15% or 20% tax bracket.also will we have the 3.8% Medicare surtax?
I understand that 78,237 of the 300,000/400,000 will be tax at 25% for recaptured depreciation. I guess my main question is AGI or taxable income used in the tax calculation
Robert Farrington says
You use your AGI.
Guy Elazar says
Isn’t there double tax payment on the LTCG due to it being included in the AGI?
For example, I have:
100k W2 wages
25k income from rent
20k LTCG
So if I understand it correctly, the AGI is the some of the 3 which is 145k.
For LTCG I would have to pay (assuming married filing jointly) 15% of 20k which is $3000.
But my question is regarding the taxable income of the AGI:
do I use 145k or only 125k (wages + rent) to calculate my tax bracket?
And if 145k is used for the calculation, doesn’t that mean that I “pay twice” for the LTCG?
one time the LTCG itself and second time when it is included in the AGI tax brackets calculations?
Robert Farrington says
No double taxation – the LTCG is a flat tax assessed on the gain, and your income is taxes based on the Federal tax brackets.
Mark Hoffman says
If I have no earned income and 20k in long term gains, I would pay $0 on the gain correct?
Would I still need to file a tax return with zero taxable income?
Robert Farrington says
Correct, you’d be in the 0% tax bracket. Yes, you would still need to file a return showing this and proving your income basically.
Rick Herrick says
In the example you use for long term capital gains, “If you are single and make a $45,000 capital gain, your long-term capital gains tax bracket is 15%. You will then pay $6,750 ($45,000 x 0.15) in taxes on this gain”. But, wouldn’t you deduct the $39,375 0% tax rate from the initial $45,000 first, and then pay 15% on the remaining amount $5625, for a tax of $844? Can you please explain.
Robert Farrington says
Capital gains are “flat” taxed, unlike regular income taxes. So, when you hit the 15% bracket (like at $45k), the whole amount it taxed at 15%.
Rick Herrick says
Thank you Robert for your reply. So, if that is the case, it would be very advantages to have a capital gain of ONLY no more than $39,375, which is taxed at 0%. Would that be correct? Thank you.
Robert Farrington says
Very advantageous – probably one of the best tax breaks you can get right now.
Art Wholeflaffer says
And then make certain that one has *no* other taxable income, not even $1.
Robert Farrington says
Haha, true!
Gretchen says
Hi Robert, this Q and A has been very insightful. My question is about capital gains on my 1099-DIV. We did not sell any stocks/mutual funds last year, yet on our Vanguard accounts 1099 under box 2a(Total capital gains distribution) it lists a small amount, less than 1K. I just don’t know why it lists this since we never sold any stocks. Are they just telling us what we would have owed if we had sold? Or do we need to pay taxes on this small amount? Box 2b (unrecap. gain) says 0.00 if that matters.
Thanks
Robert Farrington says
You need to enter that. When you own a mutual fund, everything inside the fund is passed to you. The money you receive each month/quarter/year is a combination of the dividends paid on the underlying stocks, as well as the captain gains you may have received when the mutual fund bought and sold stocks in the fund.
Most funds pay out dividends regularly, and then capital gains are paid out in December – usually breaking out payments for both long term gains and short term gains.
So, even though you didn’t sell the fund, you still earned from capital gains. So, follow the instructions on your tax software and enter those gains appropriately.
Tony says
Good morning Robert,
My parents set up an educational trust fund for their grandchildren on behalf of my sister when she passed away in 2004. There was a fairly good growth in the fund last year with long term capital gains of 9K and dividend income of $ 1200. The accountant says that my 15 yr old owes 2K in taxes now. He said it had to do with a change in the kiddie tax as a result of the TCJA. No money was taken from the account as it continued to grow for the future.
If the liability is accurate, can he file as a single tax payer and claim a standard deduction? My ex already filed with him as a dependent, but it might make sense to revise that, if legal to do so since she doesn’t pay taxes anyway, being on disability and alimony.
Robert Farrington says
Your 15yo would file a tax return, but he would need to mark he is a dependent on his tax return, and his deduction would be limited to $1,050 or his personal income plus $350 – whichever is greater. Your tax preparer/accountant should easily be able to handle this for him.
Gretchen says
Thank you for your answer, in response to “So, even though you didn’t sell the fund, you still earned from capital gains. So, follow the instructions on your tax software and enter those gains appropriately.”
Is this is true even if those gains were reinvested? This is a taxable account. And if so when it comes time to sell the funds am I going to be paying capital gains on that interest twice?
Thanks again
Robert Farrington says
When you get paid a dividend or capital gain distribution, and you reinvest it, what really happens is you’re getting paid, and then you’re buying new shares of that mutual fund. It’s a new purchase.
When you go to sell, you can count each lot (i.e. purchase) separately for STCG and LTCG.
What’s reported on the 1099 you never had to reinvest. You could have kept it in cash sitting in your brokerage. But either way, you pay tax on the event.
Rick Herrick says
Hi Robert,
I’m getting confused about who has to use the qualified dividend capital gains worksheet. I’ve been told, everyone who has net long term cap. gains, has to use that worksheet, no exceptions. But, why then does the IRS give guidelines to people who have net long term cap. gains, as to who can or should use it if there is no alternative to using that worksheet? It seems like there is ambiguity concerning the qualified dividend capital gains worksheet, and who should use it? What is your opinion, Robert. Thank you.
Marc W says
Robert this has been very helpful.
I have a question about the total accumulation of LTCG. If my wife and I sell $30,000 profit of stock and also sell $50,000 of real estate profit, are these added together for the $80,000… and thus over the $78,750 limit of 0% tax on the LTCG? Or is each type of asset treated as separate LTCG?
Robert Farrington says
Everything is cumulative – the only things that are treated separately are the collectibles and precious metals and non-preferential categories. On Schedule D, there are lines for the capital gains distributions paid by funds, the gains/losses sales of business assets from From 4797, and for pass-through gains/losses from K-1s of partnerships or corporations. They are listed separately from stock sales but calculated as one singular number for the total reportable figure.
Brian says
Hi Robert, I sold stocks this year to rebalance some of my portfolio. I attempted to equal out losses and gains to minimize capital gains. The adjusted cost $5,744.07 vs adjusted proceeds was $6,159.44 resulting in a gain of $415.35. All holdings were held for >13 months. Correct in saying that I will pay %15 on the 415.35 or will I be taxed on the total positive stock gains I sold that gained nearly $3000 in these sales? Thanks
Robert Farrington says
You just get taxed on your $413.35.
Brian says
Thank you, great site and insight:)
leo fasciocco says
Your capital gains comments are all wrong.
Robert Farrington says
Help me understand where so we can correct them?
For the simple explanation, practically all references (including ours) describe the capital gains tax as (gain * %). The long-form answer is a lot more detailed and involves “buckets” of income and different calculations because the gains are included in the calculation of AGI for tax rates but then the gains and ordinary income are calculated separately using the worksheet.
Michael Kitces breaks down the technical aspects of it all here, but that’s far beyond the scope of a simple blog post on the current capital gains tax brackets: https://www.kitces.com/blog/long-term-capital-gains-bump-zone-higher-marginal-tax-rate-phase-in-0-rate/
Brad Payne says
Do states have capital gains rates or is all AGI taxed at the state marginal tax rate?
Robert Farrington says
Every state has some variation of capital gains taxes – from unique rates to treating them as ordinary income.
Bill Desatoff says
If my wife and I sell our industrial property here in California and do a partial 1031 exchange in Missouri, will we owe taxes in the state of Missouri as well as state taxes in the state of California , If we sell the property in 10 years in Missouri ? It is my understanding that the law was changed about six years ago and if you move to another state that California makes you file a form yearly that you have not sold that property and when you do sell it they want their 13.3% , but I’m concerned that the state of Missouri will want their portion of state taxes as well, can you help me with this question. Thank you in advance
Robert Farrington says
Yes, CA will make you keep a record by filing a form every year and will make you pay taxes if you sell. This is something you should definitely discuss with a tax professional who is familiar with 1031 exchanges.
tien tran says
You mentioned in your reply of April 10 that “Capital gains are “flat” taxed, unlike regular income taxes. So, when you hit the 15% bracket (like at $45k), the whole amount it taxed at 15%”.
But Michael Kits whom you mentioned in your reply on April 24 didn’t calculate LTCG as a “fat tax”. In his example 1, he has shown the calculation of a $100,000 LTCG for a single filer that consists of “0% on the first $39,375 of long-term capital gains, and 15% on the last $60,625 of long-term capital gains, for a blended effective tax rate of 9.1%”. What I just have in the quotation is the exact wording of his article.
Would you please provide us with your clarification here? I think he is wrong and you are right. Thank you.
Robert Farrington says
Michael Kitces is 100% correct in his examples, and it illustrates it’s complicated – and his multiple examples show this extremely well.
In terms of rates, it’s a flat tax. In terms of how it’s applied, it depends – for most, it will be flat. For some, it will be complicated.
It’s definitely not something you can just do on the back of a napkin math. If you want the exact number, you need to complete the capital gains worksheet on Jan 1 for the prior year accounting for all your income (investment and ordinary).
However, if you want quick and dirty – the tax brackets are above in the article.
carlos says
if me and my wife quit our jobs (no income) which puts us in the 0% bracket and we sell our LTCG stocks for a profit let’s say 1 million dollars? do we have to pay any tax for that LTCG million capital gain since we had cero income for the year?
Robert Farrington says
No, you would have $1,000,000 in income – you’d be in the 20% LTCG bracket and you’d face NIIT of 3.8%. Furthermore, you could have AMT issues to think about as well.
RJ says
Are the brackets above for “taxable income”? In other words, what is above the standard deduction? Can a single person add $12,000 to that number to calculate maximum gain that can be taken in the 0% bracket?
Also, does all of social security count for the purpose of determining the correct bracket?
I’m single with $10,000 pension income and $24,000 social security. I would like to maximize the gain taken at 0%.
Robert Farrington says
It’s your taxable income including the gain. But for more specific details, you need to use the capital gains worksheet.
Lori says
So to ensure I understand, if for 2019 my married filing jointly total income is 65K, if I sell stock as needed for home improvements, will the capital gain be added to my income OR because I am under the 78K, I will not pay tax on my capital gain? I am trying to determine where the capital gain is added into income or is if it part of my AGI? I want to ensure I sell enough to be under that radar
Robert Farrington says
Added to your income, so it can push you over the limit. You can run the LTCG worksheet to determine exactly how much you can safely sell and be in the 0% bracket.
Mike Hennessy says
This discussion is very helpful, but I’m still not totally clear on what counts as a long-term capital gain.
Example: I buy $50,000 in shares of a mutual fund in 2015. I earn dividends/interest/LTCG on those shares during the holding period (2015-2019). I pay taxes on those gains each year, but the gains themselves are automatically reinvested into more shares of the mutual fund. When I sell the shares in 2019, what is my “basis” for calculating the LTCG? Is it $50,000? Or is it $50,000 plus the cost of the shares I bought through automatic reinvestment?
Also, do mutual fund companies typically provide investors with the amount of the basis and the LTCG? Or do I have to figure those out myself?
Thanks,
Mike
Robert Farrington says
Your basis is counted each time you buy. You can do the lot method, or average cost method. Your broker likely keeps track, but you should keep track as well.
So, original basis – 5,000 shares at $10 per share = $50,000
12/31/2015 Reinvest – $2,000 dividend, $12 per share
12/31/2016 Reinvest – $2,500 divided, $11 per share
12/31/2017 Reinvest – $3,000 divided, $14 per share
12/31/2018 Reinvest – $4,000 dividend, $15 per share
You gotta do the math on each of those lots, and either keep the average cost, or do the lot method for the sale. Notice as well, the 2018 dividend is currently short term gains as of this comment – so be aware.