What Are the Capital Gains Tax Brackets for 2024?

Short term vs. long term capital gains

There are two types of capital gains: short-term capital gains and long-term capital gains.

• Short-term capital gains: Refers to the profit earned from the sale of an asset, such as a home, that was owned for one year or less before being sold.
• Long-term capital gains: Refers to the profit earned from the sale of an asset, such as a home, that was owned for more than one year before being sold.

Here are a few additional points to keep in mind:

• The classification of capital gains as short-term or long-term is important for tax purposes.
• Short-term capital gains are typically subject to higher tax rates compared to long-term capital gains.
• Tax rates on long-term capital gains are often more favorable, offering potential tax savings.
• The specific tax rates for short-term and long-term capital gains may vary depending on the tax laws in your jurisdiction.

What is the capital gains tax?

The capital gains tax is a tax on any capital gains you make during a tax year.

If you sell your house this year (from January 1, 2024 – December 31, 2024), you may have to pay taxes on any profits you made from that sale as part of your 2024 tax filing. But, the amount of tax you owe will depend on:

1. Whether the gain is short term or long term
2. Whether you qualify for the homeowner’s exclusion (3-pronged test)

Short-term vs. long-term capital gains rates

Short-term capital gains are taxed at a different rate than long-term capital gains. We touched on them before, but let’s walk through the differences in detail:

Short-term capital gains rates:
If you lived in your house for less than one year before selling it, any gain you made from the sale of your house is taxed at your federal income tax rate. Most people are familiar with the ordinary income tax brackets that they fall under. These are the tax rates you use to pay your federal and state income taxes when you file your tax returns every year.

Long-term capital gains rates:
Long-term capital gain tax rates are slightly different. There are only three rates: 0%, 15%, or 20%. They are lower than your ordinary income tax rates and apply to any profits you received from the sale of a long-term capital asset. Most taxpayers will fall under this category because they will usually own their home for longer than 1 year.

Total taxable income impacts what you owe in capital gains

Tax brackets and capital gain tax rates are normally based on “Taxable Income,” which is Line 15 on the IRS Form 1040. To find which tax rate you fall under, you first need to determine your total taxable income.

Gather all your income sources, such as wages, salaries, self-employment earnings, rental income, and any other taxable income you received during the year. Note that income made from capital gains typically contributes to your taxable income. So when calculating your taxable income, you would include the capital gains along with any other income sources you have.

Subtract any eligible above-the-line deductions, such as contributions to retirement plans, student loan interest, and certain business expenses. The resulting amount is your adjusted gross income (AGI). Next, subtract either the standard deduction or itemized deductions, whichever is applicable to your situation. The remaining figure is your taxable income. You can find specific guidelines and tax rates from the tax authority in your country or consult a tax professional for personalized advice.

Next, when you’re calculating the amount of tax you owe, split your short-term and long-term gains apart, and calculate the taxes you owe on them separately. Use the overall tax bracket rate to calculate your tax on any ordinary income and short-term capital gains you have, and use the long-term capital gains rate to calculate your tax on any long-term capital gains you have.

2024 capital gains tax bracket breakdown

In this section, we’ll provide two tables that illustrate the differences between the 2024 ordinary income tax rates (aka, short-term rates) and the long-term capital gain tax rates for the main filling types.

2024 federal income tax brackets (short-term capital gains)

For the 2024 tax year, the IRS applied inflation adjustments to all income limits and all tax brackets. The first table below shows the 2024 federal income tax brackets and rates for ordinary income, considered short-term capital gains.

Tax rate	Single filers	Married filing jointly	Head of household
37%	$609,351 or more	$731,201 or more	$609,351 or more
35%	$243,726 to $609,350	$487,451 to $731,200	$243,701 to $609,350
32%	$191,951 to $243,725	$383,901 to $487,450	$191,951 to $243,700
24%	$100,526 to $191,950	$201,051 to $383,900	$100,501 to $191,950
22%	$47,151 to $100,525	$94,301 to $201,050	$63,101 to $100,500
12%	$11,601 to $47,150	$23,201 to $94,300	$16,551 to $63,100
10%	$0 to $11,600	$0 to $23,200	0$ to $16,550

Source: IRS.gov (Tax inflation adjustments)

Also new for 2024, the standard deduction will increase to $14,600 for single filers (up from $13,850), and married couples filing jointly can claim up to $29,200 (up from $27,700). If you are legally blind or age 65 or older, your standard deduction can be even higher.

Please note that the income thresholds and tax rates provided are based on current IRS information. It’s always recommended to refer to official IRS publications or consult with a tax professional for accurate and up-to-date tax information.

2024 capital gains tax brackets (long-term capital gains)

This second table shows the long-term capital gains rates for tax year 2024. Single filers can qualify for the 0% long-term capital gains rate with a taxable income of $47,025 or less. Married couples filing jointly can qualify with an income of $94,050 or less.

Tax rate	Single filers	Married filing jointly	Head of household
20%	$518,901 or more	$583,751 or more	$551,351 or more
15%	$47,026 to $518,900	$94,051 to $583,750	$63,001 to $551,350
0%	$0 to $47,025	$0 to $94,050	$0 to $63,000

Source: IRS.gov (Capital gains table)

Thankfully, short-term rates can be easily avoided. Just hold your house for more than one year. If you do, you will not only pay the preferential long-term capital gains rates (as shown in the charts above), but depending on how long you hold your house for, you may also qualify for the $250,000/$500,000 homeowner’s exclusion.

3-pronged test for the homeowner’s capital gains exclusion

The Homeowner’s Exclusion is a tax break to lower your capital gains tax. If you meet the exclusion requirements, you won’t need to pay taxes on up to $250,000 of your net profit, or up to $500,000 if filing jointly.

According to Section 121 of the Tax Code, to qualify for the capital gains exclusion, you have to pass these three “tests:”

1. The Use Test: You must have lived in the home (the home must be your principal residence) for an aggregate of at least two of the five years leading up to the date of the sale (consecutive or non-consecutive years).
2. The Ownership Test: You must have owned the home for at least two years.
3. The “Other Home” Test: You did not exclude your profit from the sale of another home during the two-year period ending on the date of sale of this home. In other words, you can only exclude one home sale every two years, and can only claim the exclusion once every two years.

There are a few circumstances like divorces, partial exemptions, and other special circumstances (like a constructed/inherited home or a secondary home conversion) that could be trickier to deal with.

If you find yourself in this situation, the IRS’s Publication 523, “Selling Your Home,” has some valuable information you can refer to. Gross also recommends speaking with a CPA or tax attorney to iron out the finer details. He specifically finds principal vs. secondary residence questions to be most challenging for home sellers.

If you meet all three tests above, you can apply up to $250,000 (single) or $500,000 (married) as a tax exclusion on the profits. You would only have to pay taxes on the remaining amount of profit (if there is any leftover).

If you have no leftover profits, congrats! No taxes owed. According to A.J., “the $250,000 and $500,000 exemptions are quite significant, so most homeowners rarely pay a capital gains tax on their main home.”

If you do have leftover profits, never fear, here is where your preferential long-term tax rates can come in handy.

Simply multiply any leftover profit you have by your corresponding long-term capital gain tax rate (0%, 15%, or 20%) to calculate your total tax on the capital gain.

How do capital losses factor into the equation?

So, what happens if the sale of your house results in a capital loss? You have three options here.

1. Use your capital losses to offset any capital gains.
   Capital losses can offset any capital gains you received during the year. So, say you have a $50,000 capital loss on the sale of your home, but you also have $30,000 in capital gains from the sale of stocks. In that case, you can reduce your gains using your losses (as long as they are both “capital” in nature). This leaves you with a remaining capital loss of $20,000.
2. Offset capital losses against ordinary income.
   While capital losses are generally not deductible against ordinary income, there is an exception where an individual taxpayer can claim the lesser of $3,000 ($1,500 if married filing separately) or your total net loss shown on line 16 of Schedule D (Form 1040) against ordinary income every year. From the example above, if you deduct $3,000 from your $20,000 capital loss amount, you have a $17,000 capital loss remaining.
3. Carry forward any unused capital losses indefinitely.
   If you don’t have any capital gains for the current tax year, and you’ve already offset $3,000 against your ordinary income, you can carry forward any excess capital losses to future years until the entire capital loss amount is exhausted. Using our running example, the $17,000 capital loss can be carried forward every year until it is gone (either by offsetting it against capital gains or by offsetting $3,000 every year against ordinary income).

If you have both gains and losses, you’ll have to “net” your long-term and short-term capital gains and losses and pay the capital gains tax on the net gain or loss. See Schedule D instructions for more information.

In most cases, you’ll use your home purchase and sale information to complete Form 8949 so you can report your capital gains and losses on Schedule D. Remember that the Form 1099-S (issued for home sales by your attorney, lending company, or title company) will report your capital gains directly to the government. Check out the reporting exceptions to this form.

Ultimately, the tax implications of selling a house are straightforward, but some tricky situations can present challenges. We recommend checking out our common tips on how to reduce or minimize paying a capital gains tax and the IRS’s tips for home sales and their tax implications!

Above all, reach out to a professional tax advisor for more in-depth questions. Your tax professional will be well equipped to answer all your questions and concerns and will be able to give you tax solutions tailored to your individual situation.

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