What Are Unrealized Gains?: Investment Guide

Unrealized gains refer to the increase in value of an investment you still hold. They exist only on paper because the asset hasn’t been sold, meaning no tax is triggered yet. These gains can fluctuate with the market, rising or falling until you decide to sell the investment. Understanding how they work can help you see how your portfolio is growing before any profits are actually locked in.

Consider working with a financial advisor to analyze possible capital gains on your investments.

What Are Unrealized Gains?

Essentially, unrealized gains are gains “on paper” that have not been sold for profit yet. For example, let’s say you bought seven shares of stock in your favorite company for $10 per share. Then the value of each share jumped to $15, raising the value of your from $70 to $105. You can see that your investment account balance has grown. But that doesn’t translate to more money in your bank account because you haven’t sold your shares yet.

If your investments increase in value, and you continue to hold them, the gains you see in your account are considered unrealized. Unrealized gains aren’t taxable until they become realized gains after you sell an asset. Similarly, if your investments decrease in value and you continue to hold them, your losses are considered unrealized. If you sell an asset at a loss, realized losses can be used to offset any realized gains you might have.

Calculating Unrealized Gains

The good news is that calculating unrealized gains is fairly simple. For instance, if your seven shares of stock you purchased for $10 each have since increased to $15, your unrealized gain would be $35—or seven multiplied by the $5 increase.

Now, let’s say you choose to hold onto your seven shares of stock, and the value of each share eventually climbs to $25. Your unrealized gain would increase to $105, or seven multiplied by the $15 increase. At this point, you’ve held your shares for more than a year, so you sell them and transfer the cash to your bank account. Your gains are then realized and subject to long-term capital gains taxes, which vary based on your total annual income.

Common Reasons Investors Buy and Hold

So why hold onto an investment that’s increased in value rather than sell it for a profit? There are a couple of reasons investors might do this. One is to minimize their tax burden. When you sell an investment, it’s subject to capital gains taxes. Short-term capital gains taxes apply if you sell an investment in a year or less. Long-term capital gains taxes apply if you sell an investment after holding it for more than a year.

Generally, the long-term capital gains tax rate is lower than your ordinary income tax rate. Short-term gains are taxed as ordinary income, at a rate of 10% to 37%, depending on your tax bracket. Long-term gains are taxed at a rate of 0%, 15%, or 20%, depending on your income.

So investors who hold onto assets for a longer time period could benefit from lower taxes on any gains once that asset is sold. Here’s a look at long-term capital gains tax rates for 2025 and 2026:

2025 Long-Term Capital Gains Tax Rates

Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
0%	$0 – $48,350	$0 – $96,700	$0 – $48,350	$0 – $64,750
15%	$48,350 – $533,400	$96,700 – $600,050	$48,350 – $300,000	$64,750 – $566,700
20%	$533,400+	$600,050+	$300,000+	$566,700+

2026 Long-Term Capital Gains Tax Rates

Rate	Single	Married Filing Jointly	Married Filing Separately	Head of Household
0%	$0 – $49,450	$0 – $98,900	$0 – $49,450	$0 – $66,200
15%	$49,450 – $545,500	$98,900 – $613,700	$49,450 – $306,850	$66,200 – $579,600
20%	$545,500+	$613,700+	$306,850+	$579,600+

Investors may also choose to hold onto an asset if they believe it will increase in value over time. So if a share of your favorite company stock has increased in value from $10 to $15, but you predict it’ll climb to over $25 a share in the future, you might choose to hang onto it.

Bottom Line

Unrealized gains are increases in an investment’s value that exist only on paper because you haven’t sold the asset yet. These gains can shift as the market moves, which makes the decision to hold or sell less straightforward. They stay unrealized until you complete a sale, and the eventual profit may end up higher or lower depending on how the investment performs over time.

Of course, there are no guarantees the value of your investments will actually increase. It depends on the market, company performance and other factors. Those seeking investment advice should contact a financial advisor to determine the best course of action.

Tips for Tax Planning

A financial advisor with tax expertise can help you optimize your portfolio for tax efficiency. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Capital gains taxes reduce the profits that you’ve earned from your investments. You can properly plan out what your potential liability might be by planning ahead for how your investments might grow. Use our investment calculator to know what your potential increase might be.