Short-term capital gains (assets held under 1 year) are taxed at ordinary income rates: 10–37%. Long-term gains (held 1+ year) are taxed at 0%, 15%, or 20%. On a $50,000 gain for someone in the 22% income bracket: short-term tax = $11,000. Long-term tax = $7,500. Waiting 12 months saves $3,500.
The one-year holding threshold is one of the most valuable tax rules in investing — and one of the most ignored. Selling too early on a winning position can increase your tax bill by 50–100% compared to waiting.
2026 Long-Term Capital Gains Tax Rates
- •0% rate: single filers with taxable income up to $47,025; married filing jointly up to $94,050
- •15% rate: single up to $518,900; married up to $583,750
- •20% rate: above those thresholds
- •Plus 3.8% Net Investment Income Tax if modified AGI exceeds $200,000 single / $250,000 married
Calculate Your Capital Gains Tax
The Real Cost of Selling Early
A $100,000 gain in the 24% income bracket: short-term tax = $24,000. Long-term (15% rate) = $15,000. Holding one extra month saves $9,000 — and that $9,000 stays invested and compounding. On a portfolio with regular gains, this decision repeated over a career is worth six figures.
Tax-Loss Harvesting: Offsetting Gains
Capital losses offset capital gains dollar-for-dollar before taxes are calculated. If you have $50,000 in long-term gains and $20,000 in realized losses, you only pay tax on $30,000. Additional losses beyond gains can offset up to $3,000/year of ordinary income and carry forward indefinitely.
Check your portfolio each December for positions sitting at a loss. Selling them before year-end locks in the tax offset. Just wait 31 days before rebuying to avoid the wash-sale rule.