Long-Term Capital Gains Tax Rates for 2025

What Are Capital Gains?

Many of the items you own—from stocks and bonds to your home, vehicle and more—are generally considered assets. These belongings may depreciate over time and sell for less than what you paid if you decide to resell them. But if you sell an asset for more than you paid for it, you've earned a profit known as a capital gain.

What Is Capital Gains Tax?

The capital gains tax kicks in when you sell an asset for more than you paid to buy it. The tax applies to the difference between the original purchase price and the sale price. What you'll pay in taxes depends on the type of asset sold, your taxable income and tax-filing status, and the length of time you've owned the asset.

Short-Term Capital Gains Tax

The short-term capital gains tax applies to the profits you earn from selling an asset you've owned for less than a year. Short-term capital gains are taxed at the same rate as your ordinary income, which depend on your tax bracket.

Long-Term Capital Gains Tax

If you sell an asset after owning it for more than one year, the income you receive from the sale is subject to the long-term capital gains tax rate. The rates are 0%, 15% and 20% and vary with the individual's filing status and taxable income (see below). Most individuals pay either 0% or 15%.

Long-Term Capital Gains Tax Rates for 2025

The long-term capital gains rates vary, depending on the taxpayer's filing status and income level. Here are the long-term capital gains rates for the 2025 tax year.

How to Reduce Capital Gains Taxes

Reducing capital gains taxes helps put more money back in your pocket at tax time. Here are some strategies that can help you minimize or avoid capital gains taxes.

Hold Assets for More Than a Year

When you own an asset for less than a year before selling it, you realize a short-term capital gain. This type of profit is taxed at a much higher rate than long-term capital gains. For that reason, you could try holding your asset for at least a year before selling it. This can help lower your tax bill.

Use Tax-Advantaged Accounts

A tax-advantaged account is a savings or investment account that provides tax benefits to encourage savings. The money in tax-advantaged accounts grows either tax-free or tax-deferred. Depending on the account, you either postpone your tax bill or avoid paying taxes on dividends and capital gains. Some of these accounts include IRAs, 529 college savings plans, health savings accounts (HSAs) and 401(k) plans.

Employ Tax-Loss Harvesting

Tax-loss harvesting is a strategy where you sell securities at a loss to offset gains in other investments or income. You can lower your capital gains tax bill by up to $3,000 for the tax year. Any amount over $3,000 can be carried over to future tax years.

After you sell the security, you reinvest the money in a different security that fills a similar role in your portfolio. This allows you to stay invested in the market while still lowering your tax bill.

Use the Home Sale Exclusion

If you sold your home for a profit during the tax year, you may be able to exclude some of those gains from your income. Single homeowners can exclude up to $250,000 in gains from the home sale, while joint filers can exclude up to $500,000. To qualify, you must have lived in the home as your primary residence for at least two out of the past five years. You also must not have excluded another home from capital gains in the two years before the home sale.

The Bottom Line

When you sell an asset for more than you paid for it, you'll pay a capital gains tax on the profit. The tax applies to the difference between what you originally paid for the asset and the price you sold it for.

If you hold the asset for at least a year before selling it for a profit, then you'll pay a long-term capital gains rate. The rate you pay—which can be 0%, 15% or 20%—depends on your filing status and taxable income. These rates are generally lower than what you pay on short-term capital gains.

There are ways to reduce your tax bill, though. You could use your losses to offset gains elsewhere, contribute to tax-advantaged accounts or simply try to hold the asset for at least a year before selling.