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 your capital 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:
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | $0 – $47,025 | $0 – $94,050 | $0 – $47,025 | $0 – $63,000 |
| 15% | $47,025 – $518,900 | $94,050 – $583,750 | $47,025 – $291,850 | $63,000 – $551,350 |
| 20% | $518,900+ | $583,750+ | $291,850+ | $551,350+ |
Short-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.
Tips for Investors
- 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 tool matches 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.
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