How are capital gains taxed in 2025?

by | May 2, 2025 | Income Reporting, Individual Taxes

Here’s what HIVE AI had to say about “How are capital gains taxed in 2025?”:

Capital gains tax rates in 2025 will continue to follow the tiered structure based on income levels, with rates of 0%, 15%, and 20% for most long-term capital gains, plus potential additional taxes for certain situations.

Long-Term Capital Gains Tax Rates for 2025

For long-term capital gains (assets held for more than one year), the tax rates in 2025 will be:

Net capital gains are taxed at different rates depending on overall taxable income. For most individuals, the tax rate on most net capital gain is no higher than 15%, though some or all net capital gain may be taxed at 0%.

A capital gains rate of 0% applies if your taxable income is below certain thresholds, while a 15% rate applies to income above those thresholds but below the upper limits. A 20% rate applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate. IRS.gov Tax Topics

The IRS has published guidance on “Maximum Capital Gains Rate” under § 1(h) and § 1(j)(5) for taxable years beginning in 2025. The maximum zero rate amounts and maximum 15 percent rate amounts under § 1(j)(5)(B) will be adjusted for inflation. Rev. Proc. 2024-40

While the exact income thresholds for 2025 haven’t been fully published yet, they will be adjusted for inflation from the 2024 levels, which are:

For 2024, a 0% rate applies if taxable income is less than or equal to:

  • $47,025 for single and married filing separately
  • $94,050 for married filing jointly and qualifying surviving spouse
  • $63,000 for head of household

A 15% rate applies if taxable income is:

  • More than $47,025 but less than or equal to $518,900 for single
  • More than $47,025 but less than or equal to $291,850 for married filing separately
  • More than $94,050 but less than or equal to $583,750 for married filing jointly and qualifying surviving spouse
  • More than $63,000 but less than or equal to $551,350 for head of household IRS.gov Tax Topics

Special Capital Gains Rates

Some types of capital gains are subject to different tax rates:

  • The taxable part of a gain from selling section 1202 qualified small business stock is taxed at a maximum 28% rate.
  • Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate.
  • The portion of any unrecaptured section 1250 gain from selling section 1250 real property is taxed at a maximum 25% rate. IRS.gov Tax Topics IRS.gov Tax Topics IRS.gov Tax Topics

For individuals, estates, and trusts, § 1(h) imposes differing rates of tax on net capital gains depending on the type of transaction in which the gains arise and on the taxable income of the taxpayer. The types of transaction in which a capital gain arises may cause the gain to fall into one of three rate groups: a 28-percent group (generally, gains from collectibles), a 25-percent group (generally, unrecaptured section 1250 gain), and a 20-percent group (most other net capital gain). Gains from transactions in the 20-percent group may be taxed at a 20-percent rate, a 15-percent rate, or a 0-percent rate, depending on the taxpayer’s taxable income. Notice 2015–41

Short-Term Capital Gains

Net short-term capital gains (from assets held one year or less) are subject to taxation as ordinary income at graduated tax rates. IRS.gov Tax Topics

This means short-term gains will be taxed at your regular income tax rates, which can be as high as 37% for high-income taxpayers in 2025.

Capital Loss Limitations

If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D (Form 1040), Capital Gains and Losses. Claim the loss on line 7 of your Form 1040, Form 1040-SR or Form 1040-NR. IRS.gov Tax Topics

Section 1211 provides that noncorporate taxpayers may deduct capital losses to the extent of capital gains plus $3,000. When capital losses exceed capital gains by more than $3,000, the excess may be carried forward to later taxable years. If a capital loss is to be carried forward from one year to another, the taxpayer must keep records substantiating (1) that the taxpayer incurred a loss, (2) that the taxpayer is entitled to deduct the loss, (3) the character of the loss, and (4) the amounts of any capital gain offset during any subsequent years. Dawson U.S. Tax Court Opinions: Xing F. Wang & Kathleen P. Lee

Net Investment Income Tax

In addition to the capital gains tax rates, high-income taxpayers may also be subject to the Net Investment Income Tax (NIIT) of 3.8% on investment income, including capital gains, if their modified adjusted gross income exceeds certain thresholds.

Corporate Capital Gains

The maximum long-term capital gain tax rate for individuals is 20 percent. The corporate maximum capital gain tax rate is 21 percent. IRS IRM 21.8.5 Miscellaneous Foreign Investment in Real Property Tax Act (FIRPTA) Related Issues

For corporations, capital gains are taxed at the regular corporate tax rate of 21% in 2025.

International Considerations

In the case of a nonresident alien individual present in the United States for a period or periods aggregating 183 days or more during the taxable year, there is a tax of 30 percent of the amount by which gains, derived from sources within the United States, from the sale or exchange at any time during such year of capital assets exceed losses, allocable to sources within the United States, from the sale or exchange at any time during such year of capital assets. For purposes of this paragraph, gains and losses shall be taken into account only if, and to the extent that, they would be recognized and taken into account if such gains and losses were effectively connected with the conduct of a trade or business within the United States. Any gain or loss which is taken into account in determining the tax under paragraph (1) or subsection (b) shall not be taken into account in determining the tax under this paragraph. IRC § 871(a)

Potential Changes to Watch

While the current capital gains tax structure is set to continue in 2025, it’s important to note that tax laws can change. The Tax Cuts and Jobs Act provisions affecting individual tax rates are scheduled to expire after 2025, which could potentially impact capital gains tax rates for 2026 and beyond.

Conclusion

For 2025, capital gains will continue to be taxed at 0%, 15%, or 20% for most long-term gains, depending on your taxable income, with higher rates of 25% or 28% for specific types of assets. Short-term capital gains will be taxed as ordinary income. Capital losses can offset capital gains and up to $3,000 of ordinary income, with excess losses carried forward to future tax years.

As with all tax matters, it’s advisable to consult with a tax professional for guidance specific to your situation, especially as we get closer to 2025 and if there are any legislative changes that might affect capital gains taxation.

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