when stock shares or any other taxable investment assets are sold the capital gains or profits are referred to as having been realized the tax doesn t apply to unsold investments or unrealized capital gains stock shares will not incur taxes until they are sold no matter how long the shares are held or how much they increase in value 
under current u s federal tax policy the capital gains tax rate applies only to profits from the sale of assets held for more than a year referred to as long term capital gains the current rates are 0 15 or 20 depending on the taxpayer s tax bracket for that year 1most taxpayers pay a higher rate on their income than on any long term capital gains they may have realized that gives them a financial incentive to hold investments for at least a year after which the tax on the profit will be lower day traders and others taking advantage of the ease and speed of trading online need to be aware that any profits they make from buying and selling assets held less than a year are not just taxed they are taxed at a higher rate than assets that are held long term an investor will owe long term capital gains tax on the profits of any investment owned for at least one year if the investor owns the investment for one year or less short term capital gains tax applies the short term rate is determined by the taxpayer s ordinary income bracket for all but the highest paid taxpayers that is a higher tax rate than the capital gains rate 1there is a 3 000 maximum per year on reported net losses but leftover losses can be carried forward to the following tax years 1capital gains tax rates for 2023 and 2024the profit on an asset that is sold less than a year after it is purchased is generally treated for tax purposes as if it were wages or salary such gains are added to your earned income or ordinary income on a tax return 1the same generally applies to dividends paid by an asset which represent profit although they aren t capital gains in the u s dividends are taxed as ordinary income for taxpayers who are in the 15 and higher tax brackets 2a different system applies however for long term capital gains the tax you pay on assets held for more than a year and sold at a profit varies according to a rate schedule that is based on the taxpayer s taxable income for that year the rates are adjusted for inflation each year the rates for tax years 2023 and 2024 are shown in the tables below 31the tax rates for long term capital gains are consistent with the trend to capital gains being taxed at lower rates than individual income as this table demonstrates special capital gains tax exceptionssome categories of assets get different capital gains tax treatment than the norm short term gains on collectibles including art antiques jewelry precious metals and stamp collections are taxed as ordinary income at graduated tax rates however long term gains on collectibles are taxed as ordinary income but with a cap of 28 1a different standard applies to real estate capital gains if you re selling your principal residence here s how it works 250 000 of an individual s capital gains on the sale of a home are excluded from taxable income 500 000 for those married filing jointly 45 this applies so long as the seller has owned and lived in the home for two years or more 6however unlike with some other investments capital losses from the sale of personal property such as a home are not deductible from gains 7 here s how it can work a single taxpayer who purchased a house for 200 000 and later sells their house for 500 000 had made a 300 000 profit on the sale after applying the 250 000 exemption this person must report a capital gain of 50 000 which is the amount subject to the capital gains tax in most cases the costs of significant repairs and improvements to the home can be added to its cost thus reducing the amount of taxable capital gain investors who own real estate are often allowed to take depreciation deductions against income to reflect the steady deterioration of the property as it ages 8 this is a decline in the home s physical condition and is unrelated to its changing value in the real estate market the deduction for depreciation essentially reduces the amount you re considered to have paid for the property in the first place that in turn can increase your taxable capital gain if you sell the property that s because the gap between the property s value after deductions and its sale price will be greater for example if you paid 100 000 for a building and you re allowed to claim 5 000 in depreciation you ll be taxed as if you d paid 95 000 for the building the 5 000 is then treated in a sale of the real estate as recapturing those depreciation deductions the tax rate that applies to the recaptured amount is 25 so if the person then sold the building for 110 000 there would be total capital gains of 15 000 then 5 000 of the sale figure would be treated as a recapture of the deduction from income that recaptured amount is taxed at 25 the remaining 10 000 of capital gain would be taxed at 0 15 or 20 depending on the investor s income 9if you have a high income you may be subject to another levy the net investment income tax 10this tax imposes an additional 3 8 of taxation on your investment income including your capital gains if your modified adjusted gross income magi not your taxable income exceeds certain maximums 10those threshold amounts are 250 000 if married and filing jointly or a surviving spouse 200 000 if you re single or a head of household and 125 000 if married filing separately 10calculating your capital gainscapital losses can be deducted from capital gains to calculate your taxable gains for the year the calculation becomes a little more complex if you ve incurred capital gains and capital losses on both short term and long term investments first sort short term gains and losses in a separate pile from long term gains and losses all short term gains must be reconciled to yield a total short term gain then the short term losses are totaled finally long term gains and losses are tallied 11the short term gains are netted against the short term losses to produce a net short term gain or loss the same is done with the long term gains and losses 11most individuals calculate their tax obligation or have a pro do it for them using software that automatically makes the computations you can use a capital gains calculator to get a rough idea of what you may pay on a potential or actualized sale 