Long-Term Capital Gains
Profits from selling assets held for more than one year, taxed at preferential rates of 0%, 15%, or 20% depending on your taxable income.
Long-term capital gains are profits from selling capital assets held for more than one year. They receive preferential tax rates that are lower than ordinary income rates. For 2025, the rates are 0% for single filers with taxable income up to approximately $48,350 (about $96,700 for MFJ), 15% for middle-income taxpayers, and 20% for single filers with taxable income above approximately $533,400 ($600,050 for MFJ).
These favorable rates create a significant incentive to hold investments for at least one year before selling. The tax savings can be substantial — a taxpayer in the 32% marginal bracket who realizes a $50,000 long-term gain pays $7,500 at the 15% rate instead of $16,000 at ordinary rates, a savings of $8,500.
Additionally, high-income taxpayers may owe the 3.8% Net Investment Income Tax (NIIT) on top of the capital gains rate, potentially bringing the top effective rate to 23.8%. Strategic planning around when to realize gains — including spreading large gains across multiple tax years — can help manage the overall tax impact.
How it works
Long-term capital gains are profits from selling a capital asset held for more than one year, and they receive preferential tax rates well below ordinary income tax brackets. For 2025, the rates are 0% for single filers with taxable income up to approximately $48,350 (about $96,700 for MFJ), 15% for most middle-income taxpayers, and 20% for single filers above roughly $533,400 ($600,050 for MFJ) — a three-tier structure layered on top of your ordinary taxable income rather than a flat rate for everyone.
You report long-term sales on Form 8949 and Schedule D, and your brokerage's Form 1099-B labels each transaction's holding period. The rate that applies to a given long-term gain depends on where that gain falls once it's stacked on top of your other taxable income, meaning a large gain can push part of itself into a higher bracket even while the rest stays at a lower one, similar to how ordinary tax brackets work.
High-income taxpayers may also owe the 3.8% Net Investment Income Tax on top of the 20% long-term rate, pushing the effective top rate to 23.8% for the highest earners. Because the tax savings versus ordinary rates can be substantial, taxpayers with large gains often spread sales across multiple tax years to avoid pushing income into a higher bracket in any single year, or time sales for years when their other income is unusually low.
Example: long-term rate savings vs. ordinary rates
A taxpayer in the 32% marginal ordinary income bracket sells stock held for three years, realizing a $40,000 gain. Because the holding period exceeds one year, the gain qualifies for the long-term capital gains rate rather than being taxed at their 32% ordinary rate.
At the 15% long-term rate that applies to their income level, the tax comes to $6,000. Had the identical $40,000 gain instead been short-term and taxed at their 32% ordinary rate, the bill would have been $12,800 — a $6,800 difference purely from crossing the one-year holding threshold.
2026 capital gains quick estimate
Estimate the additional federal tax caused by your gains. Uses the standard deduction; state tax is not included.
Assets held more than one year.
Assets held one year or less.
Federal tax caused by gains
$7,500Incremental estimate versus the same ordinary income with no gains.
Long-term gains tax
$7,500Top LTCG band reached: 15%
3.8% NIIT
$0No NIIT at these inputs.
Frequently asked questions
What are the long-term capital gains tax rates?
Do long-term capital gains count toward my tax bracket?
Can the Net Investment Income Tax apply on top of long-term capital gains rates?
Related Terms
Capital Gains
The profit from selling a capital asset (stocks, real estate, etc.) for more than its purchase price. Capital gains are classified as short-term or long-term based on holding period.
Short-Term Capital Gains
Profits from selling assets held for one year or less, taxed at ordinary income tax rates (10% to 37%). There is no preferential rate for short-term gains.
Net Investment Income Tax (NIIT)
A 3.8% surtax on investment income (interest, dividends, capital gains, rental income) for individuals with modified AGI above $200,000 (single) or $250,000 (married filing jointly).
Cost Basis
The original purchase price of an asset (plus adjustments like commissions and reinvested dividends), used to calculate capital gain or loss when you sell.