The Internal Revenue Service (IRS) has announced an increase in the income thresholds for capital gains taxes for the 2025 tax year, which could significantly affect those who report investment income. These adjustments, which will be relevant for tax returns filed in 2026, have been adjusted to account for inflation, making it crucial for taxpayers to understand the new figures.
New Capital Gains Tax Thresholds for 2025 For the tax year 2025, the long-term capital gains tax rates remain unchanged at 0%, 15%, and 20%. However, the income thresholds that determine these rates have been revised. It is important to note that short-term capital gains—those earned from assets held for one year or less—are taxed at ordinary income tax rates, which differ from the rates applied to long-term gains. New Brackets:
0% Rate: Single filers: Up to $48,350 – Married filing jointly: Up to $96,700 – Head of household: Up to $64,750
15% Rate: – Single filers: $48,351 to $533,400 – Married filing jointly: $96,701 to $600,050 – Head of household: $64,751 to $566,700
20% Rate: – Single filers: Over $533,400 – Married filing jointly: Over $600,050 – Head of household: Over $566,700
Comparison to 2024 Thresholds The new income thresholds reflect an approximately 2.8% increase across all filing categories when compared to 2024. Although this percentage may seem minor, it can result in significant changes to tax liability. For example, the 2.8% increase in the 20% rate threshold for married couples filing jointly allows for an additional $16,300 of income to be taxed at the lower 15% rate in 2025 compared to 2024. (2024 threshold: $583,750 / 2025 threshold: $600,050).
Furthermore, for married couples filing jointly, the threshold for the 0% rate has risen by $2,650, allowing for greater untaxed capital gains. (2024 threshold: $94,050 / 2025 threshold: $96,700). Taking Advantage of the 0% Capital Gains Rate The revised 0% capital gains rate threshold for 2025 offers opportunities for astute investors.
If your income fluctuates from year to year, it may be beneficial to realize long-term capital gains in years when your total taxable income falls below the 0% threshold. This strategy enables you to benefit from the lower tax rate. You might also consider offsetting capital gains with any losses through a strategy known as tax loss harvesting. Regardless of your approach, it’s essential to evaluate all potential income sources annually, not just those from capital gains.
The Bottom Line on Long-Term Capital Gains Tax According to Kiplinger, these adjustments to capital gains tax thresholds are part of a broader annual review that includes modifications to the 2025 federal income tax brackets and standard deductions, along with other critical tax provisions. While these changes can create advantages, such as permitting more income to be taxed at lower rates and thereby providing some relief from inflation, it is vital to remain aware of state capital gains taxes, which can also influence overall tax liability. For personalized guidance, it is always advisable to consult with a qualified tax professional who can assist in navigating the complexities of capital gains tax liability.
