Capital gains and losses come from selling assets like stocks, investments, or property. How they’re taxed depends on how long you owned the asset and your overall taxable income.
What are capital gains and capital losses?
A capital asset can include things like:
Stocks or bonds
Investment property
A home or other personal property
When you sell an asset, the difference between:
What you paid for it (your cost), and
What you sold it for determines whether you have a capital gain or a capital loss.
If you sell for more than you paid → capital gain
If you sell for less than you paid → capital loss
What’s the difference between short-term and long-term capital gains?
The difference depends on how long you owned the asset before selling it.
Short-term capital gains or losses
Assets held for one year or lessLong-term capital gains or losses
Assets held for more than one year
This distinction matters because the tax rates are different.
How are capital gains taxed in 2025?
Short-term capital gains
Short-term capital gains are taxed as ordinary income. That means they’re taxed at your regular income tax rate, which can range from 10% to 37%, depending on your income.
Long-term capital gains (2025 rates)
Long-term capital gains are taxed at 0%, 15%, or 20%, depending on your taxable income and filing status.
2025 long-term capital gains tax rates:
Tax Filing Status | 0% Tax Rate | 15% Tax Rate | 20% Tax Rate |
Single | $0 to $48,350 | $48,351 – $533,400 | Over $533,400 |
Married Filing Jointly | $0 to $96,700 | $96,701 – $600,050 | Over $600,050 |
Married Filing Separately | $0 to $48,350 | $48,351 to $300,000 | Over $300,000 |
Head of Household | $0 to $64,750 | $64,751 – $566,700 | Over $566,700 |
These rates apply to long-term gains realized during the 2025 tax year (returns generally filed in early 2026).
How do capital losses work?
Capital losses can usually be used to offset capital gains.
Offsetting a capital gain
If you have both gains and losses, you can subtract your losses from your gains.
Example:
Capital gain: $20,000
Capital loss: $5,000
Your taxable gain becomes $15,000.
What if my capital losses are higher than my gains?
If your capital losses exceed your capital gains:
Losses first offset capital gains
Up to $3,000 of remaining loss ($1,500 if married filing separately) can reduce other income
Any leftover loss is carried forward to future years
Example:
$6,000 gains − $10,000 losses = $4,000 loss
$3,000 reduces other income → $1,000 carried forward
I have capital losses but no capital gains. Can I still claim them?
Yes, but there are limits.
If you don’t have any capital gains, you may be able to use capital losses to lower your taxable income by up to:
$3,000, or
$1,500 if married filing separately
Losses from personal-use property aren’t deductible. Any unused deductible loss over $3,000 carries forward.
Key takeaway
Capital gains and losses come from selling assets
Short-term gains are taxed as ordinary income
Long-term gains have lower tax rates, based on income and filing status
Capital losses can help reduce taxable gains and may be carried forward
Understanding how gains and losses work can help you plan ahead and avoid surprises at filing time.
This content is provided for informational purposes only and should not be construed as tax, legal, financial, accounting, or other advice. Rules and regulations vary by location and are subject to change, so please consult with an expert if you need advice specific to you.
Any third-party links are provided for informational purposes only. The third parties and their sites are not endorsed by April and April is not responsible for, and has no control over, their content, privacy policies, or terms of service.