Capital gains tax: Short-term vs. long-term
Capital gains taxes are divided into two groups depending on how long you’ve held the asset.
What are the capital gains tax rates?
While the capital gains tax rates did not change under the Tax Cuts and Jobs Act of 2017, the income required to qualify for each bracket goes up each year with inflation. Here are the capital gains tax rates for the 2022 and 2023 tax years.
Source: Internal Revenue Service
Long-term capital gains tax rates for the 2023 tax year
FILING STATUS
0% RATE
15% RATE
20% RATE
Single
Up to $44,625
$44,626 – $492,300
Over $492,300
Married filing jointly
Up to $89,250
$89,251 – $553,850
Over $553,850
Married filing separately
Up to $44,625
$44,626 – $276,900
Over $276,900
Head of household
Up to $59,750
$59,751 – $523,050
Over $523,050
- Short-term capital gains tax is a tax applied to profits from selling an asset you’ve held for less than a year. Short-term capital gains taxes are paid at the same rate as you’d pay on your ordinary income, such as wages from a job.
- Long-term capital gains tax is a tax applied to assets held for more than a year. The long-term capital gains tax rates are 0 percent, 15 percent and 20 percent, depending on your income. These rates are typically much lower than the ordinary income tax rate.
What are the capital gains tax rates?
While the capital gains tax rates did not change under the Tax Cuts and Jobs Act of 2017, the income required to qualify for each bracket goes up each year with inflation. Here are the capital gains tax rates for the 2022 and 2023 tax years.
Source: Internal Revenue Service
Long-term capital gains tax rates for the 2023 tax year
FILING STATUS
0% RATE
15% RATE
20% RATE
Single
Up to $44,625
$44,626 – $492,300
Over $492,300
Married filing jointly
Up to $89,250
$89,251 – $553,850
Over $553,850
Married filing separately
Up to $44,625
$44,626 – $276,900
Over $276,900
Head of household
Up to $59,750
$59,751 – $523,050
Over $523,050
Source: Internal Revenue Service
In 2023, individual filers won’t pay any capital gains tax if their total taxable income is $44,625 or less. The rate jumps to 15 percent on capital gains, if their income is $44,626 to $492,300. Above that income level the rate climbs to 20 percent.
In addition, those capital gains may be subject to the net investment income tax (NIIT), an additional levy of 3.8 percent if the taxpayer’s income is above certain amounts. The income thresholds depend on the filer’s status (individual, married filing jointly, etc.)
Meanwhile, for short-term capital gains, the tax brackets for ordinary income taxes apply. The 2022-2023 tax brackets are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.
Unlike the long-term capital gains tax rate, there is no 0 percent rate or 20 percent ceiling for short-term capital gains taxes.
Capital gains tax strategies
Call us to discuss. Federal and state tax laws are complex and ever-changing. A tax advisor who understands your financial situation and long-term goals can offer tailored strategies to maximize your income potential. Don’t discount the value of connecting with a tax expert for a personalized strategy.
In 2023, individual filers won’t pay any capital gains tax if their total taxable income is $44,625 or less. The rate jumps to 15 percent on capital gains, if their income is $44,626 to $492,300. Above that income level the rate climbs to 20 percent.
In addition, those capital gains may be subject to the net investment income tax (NIIT), an additional levy of 3.8 percent if the taxpayer’s income is above certain amounts. The income thresholds depend on the filer’s status (individual, married filing jointly, etc.)
Meanwhile, for short-term capital gains, the tax brackets for ordinary income taxes apply. The 2022-2023 tax brackets are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.
Unlike the long-term capital gains tax rate, there is no 0 percent rate or 20 percent ceiling for short-term capital gains taxes.
Capital gains tax strategies
Call us to discuss. Federal and state tax laws are complex and ever-changing. A tax advisor who understands your financial situation and long-term goals can offer tailored strategies to maximize your income potential. Don’t discount the value of connecting with a tax expert for a personalized strategy.