Question 1

What is the long-term capital gains tax rate?

Accepted Answer

Long-term capital gains (assets held over 1 year) are taxed at 0%, 15%, or 20% depending on your total taxable income. Most middle-income taxpayers pay 15%. The 0% rate applies at lower income levels; the 20% rate applies at higher incomes above the 15%/20% threshold.

Question 2

What are short-term capital gains?

Accepted Answer

Short-term capital gains are profits from selling assets held 1 year or less. They are taxed as ordinary income — at the same rates as wages and salaries (10%-37%). Holding an asset just one day longer than 12 months converts a short-term gain into a long-term gain and can dramatically reduce the tax owed.

Question 3

What is the Net Investment Income Tax (NIIT)?

Accepted Answer

The NIIT is a 3.8% surtax on net investment income (including capital gains) for higher-income taxpayers. It applies to single filers with MAGI above $200,000 and married filing jointly above $250,000. The tax applies to the lesser of your net investment income or the amount your MAGI exceeds the threshold.

Question 4

Do states tax capital gains?

Accepted Answer

Most states tax capital gains as ordinary income at the same rate as wages. A few states have special rates or exclusions. Nine states have no income tax at all. California taxes all capital gains as ordinary income (top rate 13.3%), making it one of the highest combined federal + state rates for gains.

Question 5

What is the capital gains tax rate on real estate?

Accepted Answer

Gain from selling a primary residence may be excluded — up to $250,000 for single filers and $500,000 for married filing jointly — if you owned and lived in the home for at least 2 of the last 5 years. Gain above the exclusion is taxed as long-term capital gains if held over a year.

Question 6

What is tax-loss harvesting?

Accepted Answer

Tax-loss harvesting means selling investments at a loss to offset capital gains in the same year, reducing your tax bill. Losses offset gains dollar-for-dollar; if losses exceed gains, you can deduct up to $3,000 against ordinary income per year, with excess losses carried forward to future years.

Question 7

How is the long-term capital gains rate determined?

Accepted Answer

Your long-term rate is based on your total taxable income including the gains, not just your ordinary income alone. For 2025, single filers with total taxable income up to $48,350 owe 0% on long-term gains; $48,350-$533,400 owe 15%; above $533,400 owe 20%.

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