Capital Gains Tax Rates for 2023-2024
Capital gains are the profit you make when you sell a capital asset (such as real estate, furniture, precious metals, vehicles, collectibles or major equipment) for more money than it cost you. The profit from the sale is subject to tax.
Check Out: What To Do If You Owe Back Taxes to the IRS
For assets held for more than a year, the long-term capital gains tax rate for tax year 2023 ranges from 0% to 28%, depending on your filing status, income and asset type, and few people qualify for a rate higher than 15%. For assets held for a year or less, your capital gains are taxed at your regular income tax rate, which is 10% to 37%, depending on your income.
Even if you’re used to paying a high capital gains tax rate, double-check your figures when you file your tax return for tax year 2023. If you’re in a lower tax bracket this year than you were in the previous tax year, you may find yourself paying no tax at all on your capital gains when you file your return in April 2024.
Read on to learn more about what to expect if you have capital gains this year.
What Are the Capital Gains Tax Rates for 2023?
The capital gains tax rate brackets for tax year 2023 remain the same as 2022, but the IRS updated the income ranges for each bracket. Still, the long-term capital gains tax does not exceed 15% for most people. This 15% rate applies to the following groups:
Single individuals who earn $44,626 to $492,300
Married individuals filing separately who earn $44,626 to $276,900
Married joint filers who earn $89,251 to $553,850
Heads of household who earn $59,751 to $523,050
In some cases, capital gains are taxed at a greater rate. Individuals and couples with an income that exceeds the limits of the 15% tax rate are subject to a 20% tax rate. Individuals and couples with an income below the minimum for the 15% capital gains tax pay 0%.
Some capital assets have a higher capital gains tax rate of 25% or 28%, regardless of how long you held them:
The taxable part of a gain resulting from the sale of a Section 1202 qualified small business stock (28%)
Net capital gains from the sale of collectibles like coins or art (28%)
Any unrecaptured gain from the sale of Section 1250 real property (25%)
If you have short-term capital gains (from an asset you held for less than one year), the rate for those gains is the same as your ordinary income tax bracket, which ranges from 10% to 37%, depending on your income.
Capital Gains Tax on Real Estate
One exception to capital gains tax rules is the sale of your primary home. Up to $250,000 — $500,000 for married joint filers — is excluded. To qualify for this exception, you must have both owned the home and lived in it as your primary home for at least two of the previous five years. You can take the exclusion one time during a five-year period.
Here’s how this works. Imagine you purchased a house in 2017 for $150,000 and lived in the home until you sold it in 2023 for $300,000. Since you used it as your primary residence for six years and have a profit of $150,000, you can avoid paying capital gains tax. If you sold the property for $500,000 and are a single filer, you have a capital gain of $100,000 (subtract $250,000 from the total profit of $350,000).
This exclusion may apply to rental property as well. Let’s say you moved out in 2020 and used the property for rental income until you sold it. You still meet the criteria to exclude the capital gains from your income because you lived in it for three years.
Do Capital Gains Count as Income?
The IRS classifies income as money, property or services you receive through earned (wages, salaries and tips) or unearned sources (interest payments, dividends, rents, royalties and more). Capital gains fall under the unearned category, which makes them income.
This is why capital gains can increase your adjusted gross income, which can phase you out of itemized deductions, tax credits, Roth IRA eligibility and IRA contribution deductions. However, they do not push you into a higher tax bracket because they are taxed before your ordinary income.
Say, for example, that you and your spouse file jointly and earned $150,000 in 2023. During this period, you also sold a rental property and have a long-term capital gain of $50,000. In this example, the capital gain is taxed at a 15% rate. Then your income is taxed at a maximum rate of 22% because your combined income is less than the maximum for that bracket — in this case $190,750.
How To Calculate Your Capital Gains
Curious to see what you might owe on capital gains? Follow these steps to calculate your net capital gain or net capital loss.
These steps give you an idea of how to calculate your capital gains, but each person’s tax situation is different. For this reason, you should speak to a tax professional or financial advisor who can explain your options and help you determine the best solution for your personal needs.
What Is a Short-Term Capital Gains Tax?
You experience a short-term capital gain when you acquire a capital asset and sell it for a profit after you’ve owned it for one year or less. This is considered ordinary income, and the gain is taxed based on your traditional tax bracket.
The federal tax brackets for 2023 taxable income filed in 2024 and 2024 taxable income filed in 2025 are listed below.
Filing Status | 2023 Income Bracket | 2024 Income Bracket | Tax Rate |
|---|---|---|---|
Single | $0 to $11,000 | $0 to $11,600 | 10% |
$11,001 to $44,725 | $11,601 to $47,150 | 12% | |
$44,726 to $95,375 | $47,151 to $100,525 | 22% | |
$95,376 to $182,100 | $100,526 to $191,950 | 24% | |
$182,101 to $231,250 | $191,951 to $243,725 | 32% | |
$231,251 to $578,125 | $243,726 to $609,350 | 35% | |
$578,126 and more | $609,351 and more | 37% | |
Head of Household | $0 to $15,700 | $0 to 16,550 | 10% |
$15,701 to $59,850 | $16,551 to $63,100 | 12% | |
$59,851 to $95,350 | $63,101 to $100,500 | 22% | |
$95,351 to $182,100 | $100,501 to $191,950 | 24% | |
$182,101 to $231,250 | $191,951 to $243,700 | 32% | |
$231,251 to $578,100 | $243,701 to $609,350 | 35% | |
$578,101 and more | $609,351 and more | 37% | |
Married Filing Jointly | $0 to $22,000 | $0 to $23,200 | 10% |
$22,001 to $89,450 | $23,201 to $94,300 | 12% | |
$89,451 to $190,750 | $94,301 to $201,050 | 22% | |
$190,751 to $364,200 | $201,051 to $383,900 | 24% | |
$364,201 to $462,500 | $383,901 to $487,450 | 32% | |
$462,501 to $693,750 | $487,451 to $731,200 | 35% | |
$693,751 and more | $731,201 and more | 37% | |
Married Filing Separately | $0 to $11,000 | $0 to $11,600 | 10% |
$11,001 to $44,725 | $11,601 to $47,150 | 12% | |
$44,726 to $95,375 | $47,151 to $100,525 | 22% | |
$95,376 to $182,100 | $100,526 to $191,950 | 24% | |
$182,101 to $231,250 | $191,951 to $243,725 | 32% | |
$231,251 to $346,875 | $243,726 to $365,600 | 35% | |
$346,876 and more | $365,601 and more | 37% |
If you buy a collectible car for $10,000 in March and sell it for $15,000 in September, you have a capital gain of $5,000. Because you owned the car for only six months, it is a short-term capital gain. You have to pay the short-term capital gains tax, which is the same as your marginal income tax rate. If you’re single and earned $75,000 through your job, your tax rate for this short-term capital gain is 22%. If you earned $40,000 through your job, your short-term capital gain tax rate is 12%.
What Is a Long-Term Capital Gains Tax?
If you own a capital asset for at least one year and then sell it for a profit, you have a capital gain. Long-term capital gains are taxed at a lower rate than short-term gains, and the rate depends on your taxable income.
Filing Status | Income Bracket | Tax Rate |
|---|---|---|
Single | $0 to $44,625 | 0% |
$44,626 to $492,300 | 15% | |
$492,301 or more | 20% | |
Head of Household | $0 to $59,750 | 0% |
$59,751 to $523,050 | 15% | |
$523,051 or more | 20% | |
Married Filing Jointly | $0 to $89,250 | 0% |
$89,251 to $553,850 | 15% | |
$553,851 or more | 20% | |
Married Filing Separately | $0 to $44,625 | 0% |
$44,626 to $276,900 | 15% | |
$276,901 or more | 20% |
As an example, if you purchased a vintage dining set in 2010 for $500 and sold it in 2023 for $2,500, you have a capital gain of $2,000. If you and your spouse file together and earned a total of $175,000, your capital gain tax rate is 15%. If you bought that same dining set in 2023 and sold it the same year, you’d be taxed at the higher short-term capital gains rate. In this case, your marginal rate is 22%.
FAQ
What is the difference between the capital gains tax rate and the FICA tax rate?
The capital gains tax rate for long-term assets is 0%, 15%, 20%, 25% or 28%. You only pay capital gains tax if you sell an asset for more than you spent to acquire it. The FICA tax rate is 15.3% (12.4% for Social Security and 2.9% for Medicare). If you're employed, your employer pays half of the tax on your behalf to help fund the Social Security and Medicare programs.
How long does it take to get a tax refund?
How long a tax refund takes depends on several factors. The IRS sends out most refunds for electronically filed returns within 21 days. If you mail your return, you may wait up to a month. You may need to wait longer if you submit an incomplete or inaccurate return, have been the victim of identity theft, or submit a return that requires an investigation by the IRS.
Alicia Bodine, John Csiszar and Daria Uhlig contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: Capital Gains Tax Rates for 2023-2024
