Investing is all about making your money work for you – getting money without having to actually perform labor. But what some investors may initially neglect to take into account is the fact that investment gains mean investment income, and investment income means taxes on investment income. A financial advisor can help you create a tax plan to maximize your investments. Here’s a breakdown the tax rates for yourcapital gains in 2022 and 2023.
What Are Capital Gains?
Capital gains refer to the money that an investor makes as the profit from selling one or more of their investments or assets. Making a profit means the investor now has income, of course, so this must be factored in when filing taxes. When an investor realizes a capital gain, any proceeds will be considered taxable income.
Capital gains vary depending on how long an investor had owned the asset before selling it. Long-term capital gains come from assets held for over a year. Short-term capital gains come from assets held for under a year.
Based on filing status and taxable income, long-term capital gains are taxed at 0%, 15% and 20%. Short-term gains are taxed as ordinary income.
Long-Term Capital Gains Tax Rates for 2024
Here’s a look at the long-term capital gains tax rates for 2024:
Since short-term capital gains are taxed as ordinary income, short-term capital gains taxes mirror the federal income tax brackets, which also factor in filing status.Here are the short-term capital gains tax rates for 2024:
Rate
Single
Married Filing Jointly
Married Filing Separately
Head of Household
10%
$0 – $11,600
$0 – $23,200
$0 – $11,600
$0 – $16,550
12%
$11,600 – $47,150
$23,200 – $94,300
$11,600 – $47,150
$16,550 – $63,100
22%
$47,150 – $100,525
$94,300 – $201,050
$47,150 – $100,525
$63,100 – $100,500
24%
$100,525 – $191,950
$201,050 – $383,900
$100,525 – $191,950
$100,500 – $191,950
32%
$191,950 – $243,725
$383,900 – $487,450
$191,950 – $243,725
$191,950 – $243,700
35%
$243,725 – $609,350
$487,450 – $731,200
$243,725 – $365,600
$243,700 – $609,350
37%
$609,350+
$731,200+
$365,600+
$609,350+
Long-Term Capital Gains Tax Rates for 2023
Here are the income brackets used to calculate long-term capital gains in 2023:
Rate
Single
Married Filing Jointly
Married Filing Separately
Head of Household
0%
$0 – $44,625
$0 – $89,250
$0 – $44,625
$0 – $59,750
15%
$44,626 – $492,300
$89,251 – $553,850
$44,625 – $276,900
$59,751 – $523,050
20%
$492,300+
$553,850+
$276,900+
$523,050+
Short-Term Capital Gains Tax Rates for 2023
As with the tax rates in 2024, the federal income tax brackets are used to calculate short-term capital gains taxes in 2023. Here are those rates:
Rate
Single
Married Filing Jointly
Married Filing Separately
Head of Household
10%
$0 – $11,000
$0 – $22,000
$0 – $11,000
$0 – $15,700
12%
$11,000 – $44,725
$22,000 – $89,450
$11,000 – $44,725
$15,700 – $59,850
22%
$44,725 – $95,375
$89,450 – $190,750
$44,725 – $95,375
$59,850 – $95,350
24%
$95,375 – $182,100
$190,750 – $364,200
$95,375 – $182,100
$95,350 – $182,100
32%
$182,100 – $231,250
$364,200 – $462,500
$182,100 – $231,250
$182,100 – $231,250
35%
$231,250 – $578,125
$462,500 – $693,750
$231,250 – $346,875
$231,250 – $578,100
37%
$578,125+
$693,750+
$346,875+
$578,100+
How Are Capital Gains Calculated and Reported?
To calculate capital gains, you’ll need your basis, or the cost of the asset when you paid for it.Gains aren’t a guaranteed possibility, however. Investors may incur capital losses, meaning that the basic amount was more than the amount they eventually sold the asset for.Capital losses can be used to offset capital gains on taxes, but they must first offset capital gains of the same type.
Taxpayers who make sales during the tax year will have to report their gains and losses to the IRS on Form 1040, Schedule D, “Capital Gains and Losses.” They must first list all sales that result in these gains or losses on Form 8949, “Sales and Other Dispositions of Capital Assets.”
Bottom Line
Capital gains can be tricky, especially if you wait too long to understand how they complicate your financial situation at tax time. But knowing how long you will hold assets before selling, what the purchase and sales prices could be, as well as your tax filing status and income bracket can help you calculate how much you could owe in taxes.
Taxes can be stressful and confusing. That’s where a financial advisor’s insight and guidance are quite valuable. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free toolmatches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use SmartAsset’s free income tax calculator to get a quick estimate of what you’ll owe the federal government.
For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. The rate jumps to 15 percent on capital gains, if their income is $47,026 to $518,900.Above that income level the rate climbs to 20 percent.
For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. The rate jumps to 15 percent on capital gains, if their income is $47,026 to $518,900.Above that income level the rate climbs to 20 percent.
Whether you're 65 or 95, seniors must pay capital gains tax where it's due. This can be on the sale of real estate or other investments that have increased in value over their original purchase price, which is known as the “tax basis.”
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
Note: If you are at least 65 or blind, you can claim an additional 2024 standard deduction of $1,950 (also $1,950 if using the single or head of household filing status). If you're both 65 and blind, the additional deduction amount is doubled.
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.
You can sell your primary residence and avoid paying capital gains taxes on the first $250,000 of your profits if your tax-filing status is single, and up to $500,000 if married and filing jointly. The exemption is only available once every two years. But it can, in effect, render the capital gains tax moot.
If you sell or give away personal belongings ('chattels') then there will be no CGT if your share of the proceeds or value when given away is less than £6,000. See Selling shares and other assets for more information. Please note, however, that company shares are not usually exempt from CGT.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
Taxes aren't determined by age, so you will never age out of paying taxes. Basically, if you're 65 or older, you have to file a return for tax year 2023 (which is due in 2024) if your gross income is $15,700 or higher. If you're married filing jointly and both 65 or older, that amount is $30,700.
Are Social Security Benefits (Income) Taxable? If your combined income is above a certain limit (the IRS calls this limit the base amount), you will need to pay at least some tax. The limit for 2023 and 2024 is $25,000 if you are a single filer, head of household or qualifying widow or widower with a dependent child.
You will avoid capital gains tax if your profit on the sale is less than $250,000 (for single filers) or $500,000 (if you're married and filing jointly), provided it has been your primary residence for at least two of the past five years.
Depending on your tax situation , it could make sense to hold off on harvesting losses until 2026 when the income thresholds for capital gains taxes will readjust, because capital gains at that time could be taxed at a higher marginal rate, making the losses more valuable in 2026.
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