Capital gains are generated when a person sells an asset for more than its purchase cost. These gains are classified into two categories: short-term gains, which arise from assets held for one year or less, and long-term gains, which result from assets held for over a year.
Please remember that the information provided here is not meant to serve as tax or legal guidance. It should not be used to avoid federal tax penalties. For advice tailored to your specific situation, consult with legal or tax experts.
Short-Term vs. Long-Term Gains Short-term capital gains are taxed at the same rate as ordinary income. In contrast, long-term capital gains are taxed at different rates, which are outlined below.
Long-Term vs. Short-Term Gains
Short-term capital gains are taxed at ordinary income tax rates. Long-term capital gains are taxed according to different ranges (shown below).1
Long Term Capital Gains Tax Brackets (for 2024)
| Tax Bracket/Rate | Single | Married Filing Jointly | Head of Household |
| 0% | $0 – $47,025 | $0 – $94,050 | $0 – $63,000 |
| 15% | $47,026 – $518,900 | $94,051 – $583,750 | $63,001 – $551,350 |
| 20% | $518,900+ | $583,750+ | $551,350+ |
Additionally, taxpayers with an adjusted gross income exceeding $200,000 (for single filers or heads of household) or $250,000 (for joint filers) may face an extra 3.8% net investment income tax.
It’s also important to note that the maximum long-term capital gains rate for collectibles and precious metals is capped at 28%.
Handling Capital Losses Capital losses can be used to offset capital gains. If losses surpass gains, you can use up to $3,000 of those losses to reduce taxes on other income. If your total losses exceed $3,000, you can carry forward the excess losses to future years. These losses can be carried forward until they are fully utilized through future gains. Under current regulations, the ability to carry forward losses is preserved until death.4
Finally, calculating capital gains or losses for certain assets might be more complex than it appears. As with any tax-related issue, it is advisable to seek the assistance of a tax professional before making any decisions.
Resources:
- IRS.gov, 2024
- IRS.gov, 2024
- Investopedia.com, November 28, 2023
- IRS.gov, 2024
