Capital gains tax (2024)

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1 Federal capital gains tax
- 1.1 Current rates
- 1.2 History
2 Capital gains tax rates by state
3 Recent news
4 See also
5 External links
- 5.1 Additional reading
6 Footnotes

A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Capital assets include corporate stocks, businesses, land parcels, homes, personal items and other such assets. When someone sells a capital asset, the difference between the asset's basis, or original cost, and its selling price is the capital gain (if a profit is made) or capital loss. Capital gains are taxable at both the federal level and the state level.^[1]^[2]^[3]

At the federal level, capital gains are taxed at a lower rate than personal income. Short-term gains (i.e., gains on assets held for one year or less) are taxed at a higher rate than long-term gains (i.e., gains on assets held for more than one year). By contrast, most states tax capital gains according to the same rates as other personal income.^[1]^[2]^[3]

Federal capital gains tax

Current rates

An individual's capital gains tax liability is contingent on his or her personal income tax liability. The tables below summarize both personal income tax and capital gains tax rates for single individuals and married couples filing jointly in 2017.^[1]^[6]

Federal personal income and capital gains tax rates, 2017 (single filing status)
Taxable income		Personal income tax rate	Capital gains tax rate
Low	High	Personal income tax rate	Capital gains tax rate
$0	$9,325	10%	0%
$9,325	$37,950	15%	0%
$37,950	$91,900	25%	15%
$91,900	$191,650	28%	15%
$191,650	$416,700	33%	15%
$416,700	$418,400	35%	15%
$418,400 and up		39.60%	20%
Note: For complete notes and annotations, please see the source below. Source: Charles Schwab, "Taxes: What's New for 2017?" January 4, 2017

Federal personal income and capital gains tax rates, 2017 (married filing jointly)
Taxable income		Personal income tax rate	Capital gains tax rate
Low	High	Personal income tax rate	Capital gains tax rate
$0	$18,650	10%	0%
$18,650	$75,900	15%	0%
$75,900	$153,100	25%	15%
$153,100	$233,350	28%	15%
$233,350	$416,700	33%	15%
$416,700	$470,700	35%	15%
$470,700 and up		39.60%	20%
Note: For complete notes and annotations, please see the source below. Source: Charles Schwab, "Taxes: What's New for 2017?" January 4, 2017

History

According to the Urban Institute, capital gains were taxed at the same rates as regular income from 1913 to 1921. Since then, capital gains have been taxed at different rates than ordinary income, though the calculus involved in determining rates has changed considerably. The table below summarizes capital gains tax rates and revenues for 1954 through 2009. From 1954 through the late 1970s, uppermost long-term rates increased from 20 percent to nearly 40 percent. These rates peaked at 39.875 percent from 1976 through 1978. Beginning in 1997, uppermost rates steadily declined from 29.19 percent to a low of 15.35 percent in 2009.^[7]^[8]

Historical capital gains tax rates, 1954-2014 (dollars in millions)
Year	Total realized capital gains	Taxes paid on capital gains	Average effective tax rate	Realized gains as a percent of GDP	Maximum tax rate on long-term gains
Year	Total realized capital gains	Taxes paid on capital gains	Average effective tax rate	Realized gains as a percent of GDP	Maximum tax rate on long-term gains	1954	$7,157	$1,010	14.1%	1.88%	25%
1955	$9,881	$1,465	14.8%	2.38%	25%
1956	$9,683	$1,402	14.5%	2.21%	25%
1957	$8,110	$1,115	13.7%	1.76%	25%
1958	$9,440	$1,309	13.9%	2.02%	25%
1959	$13,137	$1,920	14.6%	2.59%	25%
1960	$11,747	$1,687	14.4%	2.23%	25%
1961	$16,001	$2,481	15.5%	2.94%	25%
1962	$13,451	$1,954	14.5%	2.3%	25%
1963	$14,579	$2,143	14.7%	2.36%	25%
1964	$17,431	$2,482	14.2%	2.63%	25%
1965	$21,484	$3,003	14%	2.99%	25%
1966	$21,348	$2,905	13.6%	2.71%	25%
1967	$27,535	$4,112	14.9%	3.31%	25%
1968	$35,607	$5,943	16.7%	3.91%	26.9%
1969	$31,439	$5,275	16.8%	3.19%	27.5%
1970	$20,848	$3,161	15.2%	2.01%	32.21%
1971	$28,341	$4,350	15.3%	2.52%	34.25%
1972	$35,869	$5,708	15.9%	2.9%	36.5%
1973	$35,757	$5,366	15%	2.59%	36.5%
1974	$30,217	$4,253	14.1%	2.02%	36.5%
1975	$30,903	$4,534	14.7%	1.89%	36.5%
1976	$39,492	$6,621	16.8%	2.16%	39.875%
1977	$45,338	$8,232	18.2%	2.23%	39.875%
1978	$50,526	$9,104	18%	2.2%	39.875% / 33.85%
1979	$73,443	$11,753	16%	2.87%	28%
1980	$74,132	$12,459	16.8%	2.66%	28%
1981	$80,938	$12,852	15.9%	2.59%	28.00% / 20.00%
1982	$90,153	$12,900	14.3%	2.77%	20%
1983	$122,773	$18,700	15.2%	3.47%	20%
1984	$140,500	$21,453	15.3%	3.57%	20%
1985	$171,985	$26,460	15.4%	4.08%	20%
1986	$327,725	$52,914	16.1%	7.35%	20%
1987	$148,449	$33,714	22.7%	3.13%	28%
1988	$162,592	$38,866	23.9%	3.19%	28%
1989	$154,040	$35,258	22.9%	2.81%	28%
1990	$123,783	$27,829	22.5%	2.13%	28%
1991	$111,592	$24,903	22.3%	1.86%	28.93%
1992	$126,692	$28,983	22.9%	2%	28.93%
1993	$152,259	$36,112	23.7%	2.28%	29.19%
1994	$152,727	$36,243	23.7%	2.16%	29.19%
1995	$180,130	$44,254	24.6%	2.43%	29.19%
1996	$260,696	$66,396	25.5%	3.33%	29.19%
1997	$364,829	$79,305	21.7%	4.38%	29.19% / 21.19%
1998	$455,223	$89,069	19.6%	5.18%	21.19%
1999	$552,608	$111,821	20.2%	5.91%	21.19%
2000	$644,285	$127,297	19.8%	6.47%	21.19%
2001	$349,441	$65,668	18.8%	3.4%	21.17%
2002	$268,615	$49,122	18.3%	2.52%	21.16%
2003	$323,306	$51,340	15.9%	2.9%	21.05% / 16.05%
2004	$499,154	$73,213	14.7%	4.21%	16.05%
2005	$690,152	$102,174	14.8%	5.47%	16.05%
2006	$798,214	$117,793	14.8%	5.97%	15.7%
2007	$924,164	$137,141	14.8%	6.59%	15.7%
2008	$497,841	$68,791	13.8%	3.48%	15.35%
2009	$263,460	$36,686	13.9%	1.89%	15.35%
2010	$394,230	$55,017	14.0%	2.63%	15.00%
2011	$404,344	$56,682	14.0%	2.61%	15.00%
2012	$647,073	$91,178	14.1%	4.01%	15.00%
2013	$510,530	$98,798	19.4%	3.06%	25.10%
2014	$716,162	$139,127	19.4%	4.02%	25.10%
Source: Tax Policy Center, "Historical Capital Gains and Taxes," November 20, 2012

Capital gains tax rates by state

In 2015, the Tax Foundation released a report detailing the uppermost capital gains tax liabilities by state. As the Tax Foundation notes, most states do not levy a separate capital gains tax. Rather, the states tax capital gains according to the same rates as personal income. The table below summarizes uppermost capital gains tax liabilities by state in 2015. California's uppermost rate ranked highest in the country at 13.3 percent. The combined rate (including the state and federal uppermost rates, as well as a 3.8 percent surtax) totaled 33 percent. By contrast, nine states that do not levy a personal income or capital gains tax tied for the lowest combined uppermost rate in the nation at 25 percent.^[2]

Uppermost capital gains tax rates by state, 2015
State	State uppermost rate	Combined uppermost rate
State	State uppermost rate	Combined uppermost rate	Alabama	5%	27.4%
Alaska	0%	25%
Arizona	4.5%	27.7%
Arkansas	7%	27.9%
California	13.3%	33%
Colorado	4.6%	27.8%
Connecticut	6.7%	29%
Delaware	6.6%	29%
Florida	0%	25%
Georgia	6%	28.6%
Hawaii	7.3%	29.4%
Idaho	7.4%	29.4%
Illinois	5%	28%
Indiana	3.4%	27.8%
Iowa	9%	29.6%
Kansas	4.8%	27.9%
Kentucky	6%	28.6%
Louisiana	6%	27.9%
Maine	8%	29.8%
Maryland	5.8%	30.3%
Massachusetts	5.2%	28.1%
Michigan	4.4%	27.8%
Minnesota	9.9%	30.9%
Mississippi	5%	28%
Missouri	6%	28.6%
Montana	6.9%	27.9%
Nebraska	6.8%	29.1%
Nevada	0%	25%
New Hampshire	0%	25%
New Jersey	9%	30.4%
New Mexico	4.9%	26.5%
New York	8.8%	31.5%
North Carolina	5.8%	28.5%
North Dakota	3.2%	26.3%
Ohio	5.4%	28.9%
Oklahoma	5.3%	28.2%
Oregon	9.9%	31%
Pennsylvania	3.1%	26.8%
Rhode Island	6%	28.6%
South Carolina	7%	27.3%
South Dakota	0%	25%
Tennessee	0%	25%
Texas	0%	25%
Utah	5%	28%
Vermont	9%	30.4%
Virginia	5.8%	28.5%
Washington	0%	25%
West Virginia	6.5%	28.9%
Wisconsin	7.7%	28.2%
Wyoming	0%	25%
Note: For complete notes and annotations, please see the source below. Source: Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," accessed October 26, 2017

Recent news

This section links to a Google news search for the term "Capital + gains + tax"

Capital gains tax policy news feed

External links

Additional reading

Footnotes

↑ ^1.0 ^1.1 ^1.2 Internal Revenue Service, "Topic 409 - Capital Gains and Losses," August 19, 2014
↑ ^2.0 ^2.1 ^2.2 Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," accessed September 29, 2015 Cite error: Invalid <ref> tag; name "TFcapital" defined multiple times with different content
↑ ^3.0 ^3.1 Tax Policy Center, "Capital Gains and Dividends: How are capital gains taxed?" June 22, 2011
↑ Washington State Budget and Policy Center, "A Capital Reform: Using Capital Gains to Fuel Job Creation and Economic Prosperity in Washington state," November 3, 2011
↑ Tax Foundation, "Capital Gains and Dividends Taxes," accessed October 22, 2014
↑ Charles Schwab, "Taxes: What's New for 2017?" January 4, 2017
↑ Urban Institute, "Capital Gains Taxation," October 1, 1999
↑ Tax Policy Center, "Historical Capital Gains and Taxes," November 2, 2017

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FAQs

Capital gains tax? ›

What is long-term capital gains tax? Long-term capital gains tax is a tax on profits from the sale of an asset held for more than a year. The rates are 0%, 15% or 20%, depending on your taxable income and filing status. Per the IRS, most people pay no more than 15% on their realized long-term capital gains.

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How much tax will I pay on capital gains? ›

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.

Tell Me More ›

What is the rule for capital gains tax? ›

If you sell a house or property in one year or less after owning it, the short-term capital gains is taxed as ordinary income, which could be as high as 37 percent. Long-term capital gains for properties you owned for over a year are taxed at 0 percent, 15 percent or 20 percent depending on your income tax bracket.

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How do I avoid paying capital gains tax? ›

Use tax-advantaged accounts

Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes at all on the assets in the account. You'll just pay income taxes when you withdraw money from the account.

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How to calculate capital gain tax? ›

To calculate capital gains, subtract the cost of acquisition and sale expenditures from the sale price. If capital gains exceed Rs. 1 lakh in a fiscal year, apply a 10% tax rate (plus surcharge and cess) on the excess profits.

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At what age do you not pay capital gains? ›

Capital Gains Tax for People Over 65. For individuals over 65, capital gains tax applies at 0% for long-term gains on assets held over a year and 15% for short-term gains under a year. Despite age, the IRS determines tax based on asset sale profits, with no special breaks for those 65 and older.

How do I calculate capital gains on sale of property? ›

Capital gain calculation in four steps

Determine your basis. ...
Determine your realized amount. ...
Subtract your basis (what you paid) from the realized amount (how much you sold it for) to determine the difference. ...
Review the descriptions in the section below to know which tax rate may apply to your capital gains.

What is the 6 year rule for capital gains tax? ›

Going by your list, the 6-year rule covers the first 6 years you rent your property out. After this when it's vacant for 6 months you can still treat it as your main residence because it's not being used to produce income. If you rent it out again straight after, then this period is subject to CGT.

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What capital gains are exempt? ›

You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly.

What triggers capital gains tax? ›

Any time you sell an investment for more than you bought it, you potentially create a taxable capital gain.