Capital Gains Tax Guide for 2024-2025: What You’ll Owe and How To Pay Less

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If you made money selling stocks, crypto, real estate or other investments, chances are you’ll owe capital gains tax. However, the amount depends on how long you held the asset and how much you earned during the year.

In this updated guide for 2024-2025, we’ll explain exactly:

• What the capital gains tax is and when it applies
• The difference between short- and long-term gains
• How to calculate what you owe
• What the IRS capital gains tax brackets are
• Strategies to reduce or avoid the tax altogether

Let’s break it down in plain English — and help you keep more of your investment profits.

What Is Capital Gains Tax?

Capital gains tax is what you pay when you sell an asset for more than you bought it for.

Examples include:

• Selling stock shares for a profit
• Flipping a second home
• Cashing out crypto
• Selling valuable collectibles like art or coins

The IRS taxes these profits at different rates depending on:

• Your income
• How long you held the asset

According to the IRS, over 25 million tax returns reported capital gains in the most recent tax year — and many people paid more than they needed to due to poor planning.

Short-Term vs. Long-Term Capital Gains

The IRS separates capital gains into two buckets:

• Short-term gains: Profits from selling an asset you held for a year or less. These are taxed at your regular income tax rate — up to 37%.
• Long-term gains: Profits from assets held for more than a year. These get taxed at lower rates — 0%, 15% or 20%, depending on your income.

Holding an asset for over a year can cut your capital gains tax rate in half or more if you qualify for long-term rates.

Long-Term Capital Gains Tax Rates for 2024-2025

Here’s what you’ll owe on long-term capital gains based on your income and filing status:

Most taxpayers fall into the 15% capital gains tax bracket, making it the most common rate paid on long-term investment profits.

Short-Term Capital Gains Are Taxed as Regular Income

If you sell an asset within a year of buying it, your gain gets taxed as ordinary income.

That means your short-term capital gains could be taxed at rates ranging from 10% to 37%, depending on your total taxable income.

Example: If you made $85,000 in 2024 and sold a crypto asset after six months, your gain would be taxed at 22% — your federal income tax bracket.

What Kinds of Investments Are Subject to Capital Gains Tax?

Here are some of the primary types of investments you’ll need to be prepared to pay out capital gains tax on.

Real Estate (Primary or Investment Property)

• Sell a primary home? You can exclude up to $250,000 (single) or $500,000 (married) in gains if you’ve lived in the home for at least two of the last five years.
• Investment properties? You’ll owe capital gains unless you use a 1031 exchange to defer the tax.

Stocks, Bonds, Mutual Funds, ETFs

• Selling assets in non-retirement accounts (like a brokerage) triggers capital gains tax.
• Capital gains don’t apply to profits in 401(k)s or IRAs — more on that below.

Cryptocurrency

• Selling, spending or exchanging crypto is a taxable event.
• Crypto is treated as property — even converting Bitcoin to Ethereum or using it to buy something triggers capital gains tax.

A 2023 Coinbase report found that over 21% of crypto users didn’t realize crypto transactions could be taxable, showing how easily investors can make IRS-reporting mistakes.

Collectibles (Art, Coins, Antiques)

• Taxed at a maximum 28% rate for long-term gains, higher than for stocks or property.

Retirement Accounts

• No capital gains tax applies inside IRAs or 401(k)s.
• With traditional accounts, you’ll pay ordinary income tax when you withdraw.
• With Roth IRAs, qualified withdrawals are tax-free, including investment gains.

How To Calculate Capital Gains (Step-by-Step)

Here’s how to figure out what you owe:

1. Find your cost basis: What you paid for the asset, including fees and commissions
2. Subtract it from your sale price: That’s your gain
3. Classify the gain: Short-term or long-term?
4. Report each transaction on Form 8949
5. Transfer totals to Schedule D
6. File it with your Form 1040

If you inherit an asset, your cost basis usually gets “stepped up” to the asset’s value at the time of inheritance, potentially reducing or eliminating capital gains tax.

Capital Gains Tax vs. Ordinary Income Tax

How To Avoid or Lower Capital Gains Tax

You don’t have to pay more than you should. Here are smart ways to lower your capital gains tax in 2024 and 2025:

Strategies That Work:

• Hold investments for over one year to get lower rates
• Tax-loss harvesting: Sell underperforming assets to offset gains
• Use retirement accounts: No capital gains tax in Roth IRAs or 401(k)s
• Donate appreciated assets to avoid selling — and get a charitable deduction
• Time your sales in years when your income is lower
• Use the home sale exclusion if you’re selling your main residence

In 2023, average tax-loss harvesting offset over $3,000 in gains per filer, according to Fidelity.

Final Take to GO: Don’t Let Capital Gains Tax Catch You Off Guard

Capital gains tax is something almost every investor deals with — but with a little planning, it doesn’t have to be painful.

Here’s the bottom line:

• If you hold an asset for more than 1 year, you’ll usually pay less in capital gains tax
• Use the home sale exclusion, Roth IRAs and tax-loss harvesting to reduce what you owe
• Track your cost basis and keep good records to avoid surprises at tax time

Capital gains tax doesn’t have to be confusing — and with the right moves, you can keep more of your profits where they belong: in your pocket.

Information is accurate as of August 7, 2025.

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