Capital gains result when an individual sells an investment for an amount greater than their purchase price. Capital gains are categorized as short-term gains (a gain realized on an asset held one year or less) or as long-term gains (a gain realized on an asset held longer than one year).
Keep in mind that the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
Long-Term vs. Short-Term Gains
Short-term capital gains are taxed at ordinary income tax rates. Long-term capital gains are taxed according to different ranges (shown below).1
Long-Term Capital Gains Tax Brackets (for 2023)
| Tax Bracket/Rate | Single | Married Filing Jointly | Head of Household |
| 0% | $0 – $44,625 | $0 – $89,250 | $0 – $59,750 |
| 15% | $44,626 – $492,300 | $89,251- $553,850 | $59,751 – $523,050 |
| 20% | $492,300+ | $553,850+ | $523,0500+ |
It should also be noted that taxpayers whose adjusted gross income is in excess of $200,000 (single filers or heads of household) or $250,000 (joint filers) may be subject to an additional 3.8% tax as a net investment income tax.2
Rules for Capital Losses
Finally, it’s important to note that, for some assets, calculating a capital gain or loss may not be as straightforward as it seems. Various factors, such as the asset type, holding period, and specific tax regulations, can complicate this process. Therefore, to ensure accuracy and compliance, it’s always advisable to seek the counsel of a tax professional before making any decisions. This extra step can help you navigate the complexities of tax laws and make more informed financial choices.