What is the US Capital Gains Tax?
US capital gains are taxed two ways. Short-term gains (assets held one year or less) are taxed as ordinary income, up to 37%. Long-term gains get preferential rates of 0%, 15% or 20% depending on total income.
High earners also pay the 3.8% Net Investment Income Tax above 200,000 single or 250,000 married. State tax is separate and can add up to 13% more.
Formula & worked example
Long term: 0% / 15% / 20% by income band, plus 3.8% NIIT above thresholds
Worked example: a single filer with 95,000 of income and a 60,000 long-term gain pays 9,000 at 15%. The same gain held under a year would be taxed at ordinary rates — dramatically more. Holding just past the one-year mark is often the highest-return decision an investor can make.
How to use this us capital gains tax calculator
- Enter your capital gain — sale price minus cost basis.
- Add your other taxable income, which determines the long-term rate band.
- Set whether you held the asset more than a year.
- Compare the short-term and long-term rows in the table.
Smart tips
- Crossing the one-year holding mark can halve your tax bill. Check acquisition dates before selling.
- Harvest losses to offset gains; up to 3,000 of net loss can offset ordinary income each year, with the rest carried forward.
- Gains inside retirement accounts are not taxed annually at all.
- Low-income years are ideal for realising gains — the 0% long-term bracket is genuinely 0%.
- This covers federal tax only. Add state tax, which ranges from 0% to over 13%.
Frequently asked questions
What is the long-term capital gains rate?
0%, 15% or 20% depending on total taxable income, plus 3.8% Net Investment Income Tax for higher earners.
How long must I hold to get long-term treatment?
More than one year from the day after purchase to the sale date.
Can losses offset gains?
Yes. Losses offset gains fully, and up to 3,000 of net loss can offset ordinary income annually, with excess carried forward indefinitely.
Do I pay state tax on capital gains?
Most states tax them as ordinary income. A few, including Florida and Texas, have no state income tax.
Want the theory behind the numbers? Read our US tax guides on the Money Blog.