Tax Facts
8608 / What new rules have been developed in recent years to change the tax rates applicable to long-term capital gain?
Congress has taken steps in recent years to reduce the rates applicable to long-term capital gains. Long-term capital gains recognized on or after May 6, 2003 are subject to lower tax rates today than has historically been the case. Under the 2017 tax reform legislation, those lower rates continue to apply, but the income thresholds that determine to whom those rates will apply have changed along with the changes to the individual income tax rates.
Up until 2018, for taxpayers in the 25, 28, 33 and 35 percent ordinary income tax brackets, the rate on long-term capital gains was reduced from 20 percent to 15 percent in 2003 through 2012. For taxpayers in the 10 and 15 percent brackets, the rate on long-term capital gains was reduced from 10 percent to 5 percent in 2003 through 2007, and then to 0 percent in 2008 through 2012. As discussed below, these lower capital gain rates have been made permanent for tax years beginning after 2012.1
The American Taxpayer Relief Act of 2012 (“ATRA”) extended the 0 percent and 15 percent capital gain rates for most taxpayers and increased the rates for taxpayers in the highest income tax bracket. ATRA permanently increased the rate on long-term capital gains to 20 percent for taxpayers with taxable income that placed them in the highest 39.6 percent income tax rate bracket (for 2012-2017).2 The applicable threshold amounts were adjusted annually for inflation.3 For taxpayers in the 10 or 15 percent income tax brackets, the rate on long-term capital gains was set at 0 percent for 2012-2017. Taxpayers in the 25, 28, 33 and 35 percent tax brackets were taxed at 15 percent on long-term capital gains for 2012-2017.4
The 0 percent capital gains rate applies to joint filers who earn less than $96,700 (half of that amount for married taxpayers filing separately), heads of households who earn less than $64,750, single filers who earn less than $48,350, and trust and estates with less than $3,250 in income.
The 15 percent rate applies to joint filers who earn more than $96,700 but less than $600,050 (half of that amount for married taxpayers filing separately), heads of households who earn more than $64,750 but less than $566,700, single filers who earn more than $48,350, but less than $533,400 and trust and estates with more than $3,250 but less than $15,900 in income.
The 20 percent rate applies to joint filers who earn more than $600,050 (half of that amount for married taxpayers filing separately), heads of households who earn more than $566,700, single filers who earn more than $533,400, and trusts and estates with more than $15,900 in income.
The 0 percent capital gains rate applies to joint filers who earn less than $94,050 (half of that amount for married taxpayers filing separately), heads of households who earn less than $63,000, single filers who earn less than $47,025, and trust and estates with less than $3,150 in income.
The 15 percent rate applies to joint filers who earn more than $94,050 but less than $583,750 (half of that amount for married taxpayers filing separately), heads of households who earn more than $63,000 but less than $551,350, single filers who earn more than $47,025, but less than $518,900 and trust and estates with more than $3,150 but less than $15,450 in income.
The 20 percent rate applies to joint filers who earn more than $583,750 (half of that amount for married taxpayers filing separately), heads of households who earn more than $551,350, single filers who earn more than $518,900, and trusts and estates with more than $15,450 in income.
The 0 percent capital gains rate applies to joint filers who earn less than $89,250 (half of that amount for married taxpayers filing separately), heads of households who earn less than $59,750, single filers who earn less than $44,625, and trust and estates with less than $3,000
in income.
The 15 percent rate applies to joint filers who earn more than $89,250 but less than $553,850 (half of that amount for married taxpayers filing separately), heads of households who earn more than $59,750 but less than $523,050, single filers who earn more than $44,625, but less than $492,300 and trust and estates with more than $3,000 but less than $14,650
in income.
The 20 percent rate applies to joint filers who earn more than $553,850 (half of that amount for married taxpayers filing separately), heads of households who earn more than $523,050, single filers who earn more than $492,300, and trusts and estates with more than $14,650 in income.5
The 0 percent rate will apply to joint filers who earn less than $83,350 (half the amount for married taxpayers filing separately), heads of households who earn less than $55,800, single filers who earn less than $41,675, and trusts and estates with less than $2,800 in income.
The 15 percent capital gains rate will apply to joint filers who earn more than $83,350 but less than $517,200 (half the amount for married taxpayers filing separately), heads of households who earn more than $55,800 but less than $488,500, single filers who earn more than $41,675 but less than $459,750, and trusts and estates with more than $2,800 but less than $13,700 in income.
The 20 percent capital gains rate will apply to joint filers who earn more than $517,200 (half that amount for married taxpayers filing separately), heads of households who earn more than $488,500, single filers who earn more than $459,750, and trusts and estates with more than $13,700 in income.6
As of January 1, 2013, an investment income tax of 3.8 percent applies to certain investment-type income (including income received from capital gains). The investment income tax was not impacted by the 2017 tax reforms and applies for taxpayers whose annual adjusted gross income exceeds the investment income threshold amount ($250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for all other taxpayers).7 See Q 8637 to Q 8647 for a detailed discussion of the investment income tax.
The rates applicable for collectibles gain, IRC Section 1202 gain (i.e., qualified small business stock), and unrecaptured IRC Section 1250 gain remained unchanged. See Q 8607.8
Repeal of qualified 5-year gain. For tax years beginning after December 31, 2000, if certain requirements were met, the maximum rates on “qualified 5-year gain” could be reduced to 8 percent and 18 percent (in place of 10 percent and 20 percent, respectively). Furthermore, a noncorporate taxpayer in the 25 percent bracket (or higher) who held a capital asset on January 1, 2001 could elect to treat the asset as if it had been sold and repurchased for its fair market value on January 1, 2001 (or on January 2, 2001 in the case of publicly traded stock). If a noncorporate taxpayer made this election, the holding period for the elected assets began after December 31, 2000, thereby making the asset eligible for the 18 percent rate if it was later sold after having been held by the taxpayer for more than five years from the date of the deemed sale and deemed reacquisition.9 Under JGTRRA 2003, the 5-year holding period requirement, and the 18 percent and 8 percent tax rates for qualified 5-year gain, were repealed. Though this repeal was scheduled to sunset along with the reduced rates on long-term capital gains, it was made permanent under ATRA.
1. IRC § 1(h)(1), as amended by ATRA; TIPRA 2005 § 102, amending JGTRRA 2003 § 303.
2. Rev. Proc. 2017-58.
3. IRC §§ 1(i), 1(h), as amended by ATRA, §§ 101(b)(3)(C) and 102(b).
4. IRC § 1(h), as amended by ATRA, § 102.
5. Rev. Proc. 2022-38.
6. Rev. Proc. 2021-45.
7. IRC § 1411.
8. IRC § 1(h).
9. IRC §§ 1(h)(2), 1(h)(9), prior to amendment by JGTRRA 2003; JCWAA 2002 § 414(a) and CRTRA 2000 § 314(c), amending TRA ’97 § 311(e).
Up until 2018, for taxpayers in the 25, 28, 33 and 35 percent ordinary income tax brackets, the rate on long-term capital gains was reduced from 20 percent to 15 percent in 2003 through 2012. For taxpayers in the 10 and 15 percent brackets, the rate on long-term capital gains was reduced from 10 percent to 5 percent in 2003 through 2007, and then to 0 percent in 2008 through 2012. As discussed below, these lower capital gain rates have been made permanent for tax years beginning after 2012.1
The American Taxpayer Relief Act of 2012 (“ATRA”) extended the 0 percent and 15 percent capital gain rates for most taxpayers and increased the rates for taxpayers in the highest income tax bracket. ATRA permanently increased the rate on long-term capital gains to 20 percent for taxpayers with taxable income that placed them in the highest 39.6 percent income tax rate bracket (for 2012-2017).2 The applicable threshold amounts were adjusted annually for inflation.3 For taxpayers in the 10 or 15 percent income tax brackets, the rate on long-term capital gains was set at 0 percent for 2012-2017. Taxpayers in the 25, 28, 33 and 35 percent tax brackets were taxed at 15 percent on long-term capital gains for 2012-2017.4
2025 Long-Term Capital Gains Rates
The 0 percent capital gains rate applies to joint filers who earn less than $96,700 (half of that amount for married taxpayers filing separately), heads of households who earn less than $64,750, single filers who earn less than $48,350, and trust and estates with less than $3,250 in income.
The 15 percent rate applies to joint filers who earn more than $96,700 but less than $600,050 (half of that amount for married taxpayers filing separately), heads of households who earn more than $64,750 but less than $566,700, single filers who earn more than $48,350, but less than $533,400 and trust and estates with more than $3,250 but less than $15,900 in income.
The 20 percent rate applies to joint filers who earn more than $600,050 (half of that amount for married taxpayers filing separately), heads of households who earn more than $566,700, single filers who earn more than $533,400, and trusts and estates with more than $15,900 in income.
2024 Long-Term Capital Gains Rates
The 0 percent capital gains rate applies to joint filers who earn less than $94,050 (half of that amount for married taxpayers filing separately), heads of households who earn less than $63,000, single filers who earn less than $47,025, and trust and estates with less than $3,150 in income.
The 15 percent rate applies to joint filers who earn more than $94,050 but less than $583,750 (half of that amount for married taxpayers filing separately), heads of households who earn more than $63,000 but less than $551,350, single filers who earn more than $47,025, but less than $518,900 and trust and estates with more than $3,150 but less than $15,450 in income.
The 20 percent rate applies to joint filers who earn more than $583,750 (half of that amount for married taxpayers filing separately), heads of households who earn more than $551,350, single filers who earn more than $518,900, and trusts and estates with more than $15,450 in income.
2023 Long-Term Capital Gains Rates
The 0 percent capital gains rate applies to joint filers who earn less than $89,250 (half of that amount for married taxpayers filing separately), heads of households who earn less than $59,750, single filers who earn less than $44,625, and trust and estates with less than $3,000
in income.
The 15 percent rate applies to joint filers who earn more than $89,250 but less than $553,850 (half of that amount for married taxpayers filing separately), heads of households who earn more than $59,750 but less than $523,050, single filers who earn more than $44,625, but less than $492,300 and trust and estates with more than $3,000 but less than $14,650
in income.
The 20 percent rate applies to joint filers who earn more than $553,850 (half of that amount for married taxpayers filing separately), heads of households who earn more than $523,050, single filers who earn more than $492,300, and trusts and estates with more than $14,650 in income.5
2022 Long-Term Capital Gains Rates
The 0 percent rate will apply to joint filers who earn less than $83,350 (half the amount for married taxpayers filing separately), heads of households who earn less than $55,800, single filers who earn less than $41,675, and trusts and estates with less than $2,800 in income.
The 15 percent capital gains rate will apply to joint filers who earn more than $83,350 but less than $517,200 (half the amount for married taxpayers filing separately), heads of households who earn more than $55,800 but less than $488,500, single filers who earn more than $41,675 but less than $459,750, and trusts and estates with more than $2,800 but less than $13,700 in income.
The 20 percent capital gains rate will apply to joint filers who earn more than $517,200 (half that amount for married taxpayers filing separately), heads of households who earn more than $488,500, single filers who earn more than $459,750, and trusts and estates with more than $13,700 in income.6
As of January 1, 2013, an investment income tax of 3.8 percent applies to certain investment-type income (including income received from capital gains). The investment income tax was not impacted by the 2017 tax reforms and applies for taxpayers whose annual adjusted gross income exceeds the investment income threshold amount ($250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for all other taxpayers).7 See Q 8637 to Q 8647 for a detailed discussion of the investment income tax.
The rates applicable for collectibles gain, IRC Section 1202 gain (i.e., qualified small business stock), and unrecaptured IRC Section 1250 gain remained unchanged. See Q 8607.8
Repeal of qualified 5-year gain. For tax years beginning after December 31, 2000, if certain requirements were met, the maximum rates on “qualified 5-year gain” could be reduced to 8 percent and 18 percent (in place of 10 percent and 20 percent, respectively). Furthermore, a noncorporate taxpayer in the 25 percent bracket (or higher) who held a capital asset on January 1, 2001 could elect to treat the asset as if it had been sold and repurchased for its fair market value on January 1, 2001 (or on January 2, 2001 in the case of publicly traded stock). If a noncorporate taxpayer made this election, the holding period for the elected assets began after December 31, 2000, thereby making the asset eligible for the 18 percent rate if it was later sold after having been held by the taxpayer for more than five years from the date of the deemed sale and deemed reacquisition.9 Under JGTRRA 2003, the 5-year holding period requirement, and the 18 percent and 8 percent tax rates for qualified 5-year gain, were repealed. Though this repeal was scheduled to sunset along with the reduced rates on long-term capital gains, it was made permanent under ATRA.
1. IRC § 1(h)(1), as amended by ATRA; TIPRA 2005 § 102, amending JGTRRA 2003 § 303.
2. Rev. Proc. 2017-58.
3. IRC §§ 1(i), 1(h), as amended by ATRA, §§ 101(b)(3)(C) and 102(b).
4. IRC § 1(h), as amended by ATRA, § 102.
5. Rev. Proc. 2022-38.
6. Rev. Proc. 2021-45.
7. IRC § 1411.
8. IRC § 1(h).
9. IRC §§ 1(h)(2), 1(h)(9), prior to amendment by JGTRRA 2003; JCWAA 2002 § 414(a) and CRTRA 2000 § 314(c), amending TRA ’97 § 311(e).
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