Short-term vs. long-term capital gains

The holding period determines which tax rate applies:

Short-term (held ≤ 1 year): taxed as ordinary income at your marginal federal income tax rate (10%, 12%, 22%, 24%, 32%, 35%, or 37% for 2025).
Long-term (held > 1 year): taxed at preferential rates of 0%, 15%, or 20% depending on your taxable income.

2025 long-term capital gains rate brackets

Rate	Single filers	Married filing jointly
0%	Up to $48,350	Up to $96,700
15%	$48,351 – $533,400	$96,701 – $600,050
20%	Over $533,400	Over $600,050

Taxable income includes your capital gains; the rate brackets apply to the top portion of your income.

Net Investment Income Tax (NIIT)

High-income taxpayers may owe an additional 3.8% surtax on net investment income (capital gains, dividends, interest) under the Affordable Care Act. This applies to the lesser of net investment income or the amount by which modified adjusted gross income (MAGI) exceeds $200,000 (single) or $250,000 (married filing jointly). Effectively, the top federal rate on long-term capital gains becomes 23.8% for those above these thresholds.

Wash-sale rule

If you sell a security at a loss and repurchase a "substantially identical" security within 30 days before or after the sale, the IRS disallows the loss deduction. This 61-day window (30 days before + day of sale + 30 days after) is the wash-sale period. The disallowed loss is added to the cost basis of the repurchased security rather than being permanently lost, but it can complicate year-end tax-loss harvesting strategies.