It’s easy to get caught up in choosing investments and forget about the tax consequences—particularly, the capital gains tax. After all, picking the right stock or mutual fund can be challenging enough without worrying about after-tax returns. Likewise, selling a𝕴 home can be a daunting task, even before you consider the tax bill.

Still, figuring taxes into your overall strategy—and timing when you buy and sell—is crucial to getting the most out of your investments. Here, we look at the 澳洲幸运5开奖号码历史查询:capital gains tax and what you can do to minimize it.

What Are Capital Gains?

A capital gain is the increase in value of a 澳洲幸运5开奖号码历史查询:capital asset💟 when it is sold. Whenever you sell an asset for more than what you originally paid for it, the difference between those two prices is the capital gain.

Lots of different types of assets that you might own are capital assets, including investments (like a stock, bond, or real estate) or something purchased for 🌜personal use (like furniture or a boat).

Capital gains are only realized when you sell an asset. The Internal Revenue Service (IRS) taxes individuals on gains from the sale under certain circum☂stances.

What Is a Capital Gains Tax?

Just as the government wants a cut of your income, it also expects a cut when you realize a profit—aka a "澳洲幸运5开奖号码历史查询:capital gain"—on your investments. That cut isജ the capi🧔tal gains tax.

For tax purposes, it’s helpful to understand the difference between 澳洲幸运5开奖号码历史查询:unrealized gains and 澳洲幸运5开奖号码历史查询:realized gains. An unrealized gain is a potential profit that exists on paper—an increase in the value of an asset or investment you own but haven't yet sold for cash. For example, say you buy some stock in a company, and a year later, it’s wo𒉰rth 15% more than you paid for it. Although your investment has increased in value by 15%, that gain is unrealized since you still own the stock.

On the other hand, a gain becomes realized when you sell the asset or investment at a profit—that is, for more than its basis. For instance, you realize a gain of $5,000 if you sell that stock for $25,000 after paying $20,000 for it. A tax on🧜 capital gains only happens when an asset is sold or "realized."

Which Assets Qualify for Capital Gain🌠s Treatme💖nt?

Capital gains taxes apply to what are known as 澳洲幸运5开奖号码历史查询:capital assets. Examples of capital assets include:

• Stocks
• Bonds
• Digital assets, like virtual currencies, stablecoins, and 澳洲幸运5开奖号码历史查询:non-fungible tokens (NFTs)
• Gems and jewelry
• Your home
• Household furnishings
• Your vehicle
• Gold, silver, and other metals
• Coin and stamp collections
• Timber grown on your home property or investment property

However, not every capital asset you own will qualify for capital gainꦛs treatment. Examples of noncapital🔴 assets include:

• Business inventory  
• Accounts receivable acquired in the ordinary course of business
• Depreciable business property
• Real property (real estate) used in your trade or business as rental property

Also excluded from capital gains treatment are certain self-created int𝔍angibles, such as:

• Copyrights
• Literary, musical, or artistic compositions
• Letters, memoranda, or similar property (e.g., drafts of speeches, recordings, transcripts, manuscripts, drawings, and photographs)
• A patent, invention, model, design (patented or not), or secret formula

How Do Capital Gains Taxes Work?

Say you bought 100 shares of XYZ Corp. stock at $20 per share and sold them more than a year later for $50 per share. Let’s also assume that you fall into the income category where your long-term gains are taxed at 15%. The table below summarizes how your gains from XYZ stock are affected.

In this example, $450 of your profit will go to the government. But it could be worse. Had you held the stock for one year or less (making your capital gain a short-term one), your profit would have been taxed at your ordinary income tax rate, which can be as high as 37% for tax years 2023 and 2024. And that’s not counting any additi🏅onal state taxes.

Short-Term vs. Long-Term Capital Gains

The tax you’ll pay on a capital gain depends on how long you hold the asset before selling it.

Assets you hold for more than one year qualify for the more favorable 澳洲幸运5开奖号码历史查询:long-term capital gains rates. In contrast, gains on investments you’ve held for one year or less are 澳洲幸运5开奖号码历史查询:short-term capital gains, which are taxed at your higher, 澳洲幸运5开奖号码历史查询:ordinary income tax rate (there are limited exceptions to the one-year holding-period rule).

The tax system in the U.S. benefits long-term investors. Short-term investments are almost always taxed at a higher rate than loꦚng-term investments.

Capital Gains Tax Rates for 2024

Short-term capital gains are taxed at ordinary income tax rates up to 37% (the seven marginal tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%). By contrast, long-term capital gains are taxed at different, generally lower rates. The capital gains rates are 0%, 15%, and 20%, depending on your taxable income. Here's a breakdown for tax year 2024:

Although marginal 澳洲幸运5开奖号码历史查询:tax brackets have changed over the years, historically the maximum tax on ordinary income has almost always been significantly higher than the maximum rate on capital gains.

Not all capital gains are taxed according to the standard 0%/15%/20% schedule. Here are some exceptions where capital gains mayꦏ be taxed at higher rates than 20%:

• Gains on collectibles, such as artworks and stamp collections, are taxed at a maximum 28% rate. Currently, it is unclear whether the IRS could ultimately 澳洲幸运5开奖号码历史查询:treat some NFTs as collectibles for tax purposes.
• The taxable portion of gain on the sale of qualified small business stock (澳洲幸运5开奖号码历史查询:Section 1202 stock) is also taxed at a maximum 28% rate.
• The portion of any 澳洲幸运5开奖号码历史查询:unrecaptured Section 1250 gain from selling 澳洲幸运5开奖号码历史查询:Section 1250 real property is taxed at a maximum 25% rate.

Capital Gains Tax Rates for 2025

Here are the capital gains tax rates for 2025:

How t🃏he 2024 Election May Change Capital Gains🎃 Tax Rates

The election of Donald Trump as the 47th president may come with changes to capital gains tax rates. There is no mention of capital gains taxes in the 2024 Republican Party platform or on , a website for President Trump.

However, Project 2025, the 900-plus page agenda that has been dubbed a blueprint for the next Republican president, calls for a 15% maximum long-term capital gains tax rate, essentially eliminating the top rate of 20%. Although Trump has distanced himself from Project 2025, it's clear he hopes to lower taxes beyond what was passed in the 2017 澳洲幸运5开奖号码历史查询:Tax Cuts and Jobs Act (TCJA) when he was last in office.

Long-Term Capital Gains Taxes

Capital gains on long term investments are treated more favorably than those on short term investments by the U.S. Tax Code. The tax rates for long term gains, which range from 0% to 20%, are determined by your tax filing status and your 澳洲幸运5开奖号码历史查询:taxable income. Taxable income is your adjusted gross income (AGI) minus either the standard deduction or allowable itemized ꧒deductions.

As an example, if you are married filing jointly and your taxable income is $176,000 in 2024, your long term capital gains tax rate will be 15%. You would have to make less than $94,050 as a couple to pay a capital gains tax rate of 0%.

Short-Term Capital Gains Taxes

As mentioned above, the tax treatment of short term capital gains isn't as beneficial to an investor as that of long term capital gains. Instead of being taxed at a rate of 0%, 15%, or 20%, depending on income and tax filing status, short term capital gains are taxed at the same rates as ordinary income, which is between 10% and 37%.

Following from the example just above, the short term capital gains tax rate for a couple making $176,000 and filing jointly would be 22% in 2024. If you can, it pays to hold investments for over a year in order to avoid paying higher taxes on your investment gains.

Ho🀅w Do You Calculate Capital Gains on the Sale of Property?

The amount of capital gains you pay on the sale of property depends on whether the property is your principal residenc𒉰e (and how long you lived there) or a rental or investment property.

Due to a 澳洲幸运5开奖号码历史查询:special exclusion, capital gains on the sale of a 澳洲幸运5开奖号码历史查询:principal residence are taxed differently than other types of real estate. Basically, if you sell your main home and have a capital gain, you can exclude up to $250,000 of that gain from your income, provided you owned and lived in the home for two years or more out of the last five years. (The years don't have to be consecutive.) For 澳洲幸运5开奖号码历史查询:married couples filing jointly, the exclusion is $500,000.

Let's say you and your spouse purchased your home for $400,000 and lived in it for seven years. If you now sell it for $675,000, your profit is $275,000, which means that you won't owe the IRS any capital gains taxes on the sale, given the $500,000 exclusion for married couples.

However, a rental property doesn't qualify for the same exclusion on capital gains taxes as a primary residence does. If you sell a rental property that you've owned for more than a year and for a higher price than you paid for it, the IRS requires that you pay a 25% 澳洲幸运5开奖号码历史查询:depreciation recapture on the portion of your profit that you previously deducted as depreciation. You'll also have to pay long-term capital gains on the profit balance at a rate of 0%, 15%, or 20%, depending on your income—assuming you have owned the property for more than a year. If you've owned if for less time than that,🍷 any profit you make will be taxed at your ordinary income tax rate.

It is possible to reduce your capital gains tax on the saleꩵ of a rental property if you plan ahead—for example, by establishing it as your primary residence for at least two years prior to any sale. Consult a tax expert for advice on other meꦰthods.

Net Investment Income Tax

In addition to regular capital gains tax, some taxpayers are subject to the 澳洲幸运5开奖号码历史查询:net investment income (NII) tax. It imposes an additional 3.8% tax on your investment income, including your capital gains, if your 澳洲幸运5开奖号码历史查询:modified adjust𓃲ed gross inc꧟ome (MAGI) is greater than:

• $250,000 if married filing jointly or a qualifying widow(er) with a child
• $200,000 if single or a head of household
• $125,000 if married filing separately

Ho🅘w to Calculꦇate Your Long-Term Capital Gains Tax

Most individuals figure their tax (or have pros do it for them) using software that automatically makes the computations. You can also use a capital gains calculator to get a rough idea. Several free calculators are available online. Still, if you want to crunch the numbers yourself, here's the basic method for calculating capital gains tax:

1. Determine your basis. The basis is generally the purchase price plus any commissions or fees you paid. The basis can be adjusted up or down for stock splits and dividends.
2. Determine your realized amount. This is the sale price minus any commissions or fees you paid.
3. Subtract the basis (what you paid) from the realized amount (what you sold it for) to determine the difference. This is the capital gain (or loss).
4. Determine your tax. If you have a capital gain, multiply the amount by the appropriate tax rate to determine your capital gains tax for the asset (remember that tax rates differ depending on your taxable income and 澳洲幸运5开奖号码历史查询:how long you held the asset before you sold it). If you have a capital loss, you may be able to use the loss to offset capital gains.

How to Minimize or Avoid Capital Gains Tax

There are a number of ways to minimize or even avoid capital gains taxes. Here's a look at five of the more common strategies:

1. Invest for the Long Term 

You will pay the lowest capital gains tax rate if you find great companies and hold their stock long-term. Of course, this is easier said than done. A company’s fortunes can change over the years, and there are many reasons why you 澳洲幸运5开奖号码历史查询:might want or need to sell earlier than you originally anticipated.

2. Take Adﷺvantage of Tax-Deferred Retirement Plans 

When you invest your money through a retirement plan, such as a 401(k), 403(b), or 澳洲幸运5开奖号码历史查询:individual retirement account (IRA), it will grow without being subject to immediate taxes. You can also buy and sell investments within your retirement account without triggering capital gains tax.

In the case of traditional retirement accounts, your gains will be taxed as ordinary income when you withdraw money, but by then, you may be in a 澳洲幸运5开奖号码历史查询:lower tax bracket than when you were working. With Roth IRA accounts. However, the money you withdraw will be tax-free—as long as you follow the 澳洲幸运5开奖号码历史查询:relevant rules.

For investments outside of these accounts, it might behoove investors near retirement to wait until they stop working to sell. If their retirement income is low enough, their capital gains tax bill might be reduced, or they may be able to avoid paying any capital gains tax. But if they’re already in one of the “no-pay” brackets, there’s a key factor to keep in mind: If the capital gain is large enough, it 澳洲幸运5开奖号码历史🍌查询:could increase their total taxable incomeও to a level where they would incur a tax 𝕴bill on their gains.

3. Use Capital Losses to Offset Gains 

If you experience an investment loss, you can take advantage of it by decreasing the tax on your gains on other investments. Say you own two stocks, one worth 10% more than you paid for it, while the other is worth 5% less. If you sold both stocks, the loss on the one would reduce the capital gains tax that you would owe on the other. Obviously, in an ideal situation, all of your investments would appreciate, buܫt losses do happen, and this is one way to get some benefit from them.

If your capital losses exceed your capital gains, you can use up to $3,000 of it to offset ordinary income for the year. After that, you can 澳洲幸运5开奖号码历史查询:carry over the loss to future tax years until it is exhausted.

4. Watch Your Holding Periods 

If you are selling a security that you bought about a year ago, be sure to find out the trade date of the purchase. Waiting a few days or weeks to qualify for long-term capital gains treatment might be a wise move as long as the investment's price is holding relatively steady.

5. Pick Your Cost Basis 

When you’ve acquired shares in the same company or mutual fund at different times and prices, you’ll need to determine your 澳洲幸运5开奖号码历史查询:cost basis for the shares you sell. Although investors typically use the 澳洲幸运5开奖号码历史查询:first in, first out (FIFO) method to calculate cost basis, there are four other methods available: 澳洲幸运5开奖号码历史查询:last in, first out (LIFO), 澳洲幸运5开奖号码历史查询:dollar-value LIFO, 澳洲幸运5开奖号码历史查询:specific share identification, and 澳洲幸运5开奖号码历史查询:average cost (only for mutual fund shares).

If you’re selling a substantial holding, it could be worth consulting a tax a🧔dvisor to determine which method make🌞s the most sense to use.

The Bottom Line

Although the tax tail should not wag the entire ✤financial dog, it’s important to take taxes into account as part of your investing strategy. Minimizing the capital gains taxes you have to pay—for example, by holding investments for more than a year before you sell them—is one easy way to boost your after-tax returns.