Everything you need to know about long-term capital gains tax
Key takeaways
Long-term capital gains tax applies to profits from assets held for more than one year.
Tax rates vary depending on your income level and the type of asset sold.
Understanding capital gains taxes can help you make informed investment decisions and potentially reduce tax liability.
We all hold capital assets for personal or investment purposes. Common capital assets you may hold in your name include:
- Your home
- Personal-use items like household furnishings
- Stocks or bonds held as investments
When you dispose of capital assets, the associated gain, minus your adjusted basis in the asset is what is referred to as a capital gain. If you lose money instead of gaining money, the associated loss minus adjusted basis is what is referred to as a capital loss. Note that while the cost is usually the basis of your property, if you acquired it by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost.
Capital gains are split up into two subcategories, short-term capital gains, and long-term capital gains. Here’s what you need to know about what classifies as a long-term capital gain as well as what the long-term capital tax gains tax rate is, based on tax bracket. We’ll also explore long vs. short-term capital gains.
What does disposing of an asset mean?
Disposing of a capital asset may include any of the following:¹
- You sell property.
- You exchange property for other property.
- Your property is condemned or disposed of under threat of condemnation.
- Your property is repossessed.
- You abandon property.
- You give property away
Comparing short-term vs. long-term capital gains tax and capital loss tax
In most cases, if you dispose of a capital asset you’ve had for over one year, your capital gain or loss is classified as long-term.
If, on the other hand you hold onto your asset for one year or less, the associated capital gain or loss is generally classified as short-term.
To figure out how long you held the asset, you “count from the day after the day you acquired the asset up to and including the day you disposed of the asset.”, according to the IRS.²
A note on net long term capital gain & loss
The IRS looks at individual dispositions as well as your net capital gain/loss for a given tax year. To figure that out:
- Subtract any losses from selling long-term investments from any profits from selling long-term investments. This gives you your net long-term capital gain.
- Subtract any profits from selling short-term investments from any losses from selling short-term investments. This gives you your net short-term capital loss.
- Subtract your net short-term capital loss from your net long-term capital gain. This is your net capital gain.
In other words, reporting each capital gain or loss you experience is important, but you should be aware that so is your net capital gain for that year.
What is the long-term capital gains tax rate?
There is not one fixed long-term capital gains tax rate. Instead, you could be charged 0%, 15%, or 20% for long-term capital gains, depending on the tax bracket you fall into. Here’s more information on potential tax on long term capital gains based on each specific long term capital gains tax bracket.
- You might pay 0% tax: If your total taxable income is less than about $45,000 for single filers, $90,000 for joint filers, or $60,000 for heads of household.
- You'll likely pay 15% tax: If your total taxable income is above those amounts, but less than roughly $492,000 for single filers, $554,000 for joint filers, or $523,000 for heads of household.
- You'll likely pay 20% tax: If your income is above those higher thresholds.
There are also several exceptions where you might pay more than 20% on some of your capital gains:
- Small business stock: Up to 28% on some profits from selling certain small business stock.
- Collectibles: Up to 28% on profits from selling coins, art, or other collectibles.
- Real estate: Up to 25% on a portion of the profit from selling certain real estate.
If you sell an investment after holding it for one year or less (short-term), your profit is taxed at your regular income tax rate, which for most people is significantly higher than the long-term capital gains rates.
Conclusion
Understanding long-term capital gains tax is extremely important for making smart investment decisions and remaining compliant with the IRS.
By holding assets for longer than a year, you can potentially lower your tax burden. The inverse can be true for holding assets for less than a year. That said, the above information is intended as informational only.
Always consult a tax professional for personalized advice. To delve deeper, we recommend reading IRS Publications 550 and 544.
We also invite you to explore more tax topics by heading to our tax guides page, which contains a wealth of information intended to help you make sense of everything tax-related in the United States.
Related Content
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
© 2026 Raisin SE. All rights reserved.
The Raisin name and logo are trademarks of Raisin SE. All other trademarks, logos, marks, and brand names are the property of their respective owners.
*APY means Annual Percentage Yield. APY is accurate as of April 27, 2026. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.
Raisin is not an FDIC-insured bank, and FDIC deposit insurance only covers the failure of an insured bank.
Raisin is not an NCUA-insured credit union. NCUA deposit insurance only covers the failure of an insured credit union.
Raisin does not hold any customer funds. Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through Raisin.com. The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered by the applicable bank or credit union through Raisin.com. Each customer also authorizes the Service Bank to move funds among the various banks and credit unions at the customer’s request. First International Bank & Trust (FIBT), Member FDIC, is the Service Bank. Bell Bank and Starion Bank, each Member FDIC, are the Custodial Banks.
†Based on $250,000 in FDIC or NCUA insurance coverage per insurable category of ownership at each partner bank or credit union on the Raisin platform (each a "Product Bank"), when aggregated with all other deposits held by you at such Product Bank and in the same insurable category. Deposits made through Raisin will be eligible to receive deposit insurance from the FDIC or the NCUA (each a "Deposit Insurer") in accordance with and up to the maximum amount permitted by law at each Product Bank. Raisin is not a bank or credit union and does not hold any customer funds. Funds are held at FDIC-insured banks and NCUA-insured credit unions. Deposit insurance covers the failure of an insured bank or credit union. Certain conditions must be satisfied for pass through deposit insurance coverage to apply. Customers may choose to deposit funds with identically registered accounts at different Product Banks on the Raisin platform to be eligible for Deposit Insurer coverage up to $10 million for individual accounts and $20 million for joint accounts when at least 40 Product Banks are utilized. Please be aware, however, that any deposits you have at a Product Bank, whether through the Raisin platform or outside the Raisin platform, that you may hold in the same capacity (such as in an individual capacity or joint capacity) count toward the applicable Deposit Insurer's deposit insurance maximum amount, and any such amounts that you hold in the same capacity at a Product Bank that exceed the maximum insurance coverage by the applicable Deposit Insurer will not be insured. For more information on FDIC deposit insurance, please see here. For more information on the NCUA share insurance fund, please see here. You are solely responsible for monitoring the amount of funds you have on deposit at each a Product Bank, whether through the Raisin platform or outside the Raisin platform, to confirm that the deposits you hold in the same capacity at each Product Bank do not exceed the maximum deposit insurance coverage provided by the applicable Deposit Insurer.