Question 1

What is capital gains tax?

Accepted Answer

Capital gains tax is the tax owed on the profit from selling an asset — stocks, bonds, real estate, cryptocurrency, or other investments. The gain is calculated as Sale Price minus Purchase Price. If the result is positive, it's a taxable gain; if negative, it's a capital loss (which can offset other gains or up to $3,000 of ordinary income per year). The tax rate depends on how long you held the asset.

Question 2

What is the difference between short-term and long-term capital gains?

Accepted Answer

Short-term capital gains apply to assets held for one year or less. They are taxed as ordinary income at your regular federal tax bracket rate (10%–37%). Long-term capital gains apply to assets held longer than one year and receive preferential tax rates: 0%, 15%, or 20% based on your taxable income. The rate difference is significant — a long-term gain that would face 22% as short-term might only face 15% as long-term.

Question 3

What are the 2025 long-term capital gains tax rates?

Accepted Answer

For 2025: 0% rate applies to single filers with taxable income up to $48,350 (married: $96,700; HOH: $64,750). The 15% rate applies up to $533,400 (single), $600,050 (married), $566,700 (HOH). The 20% rate applies above those thresholds. These rates apply to the capital gain portion only — your ordinary income is taxed separately at regular brackets.

Question 4

How does income affect the capital gains tax rate?

Accepted Answer

Long-term capital gains are "stacked" on top of your ordinary income. The combined total determines which rate applies to each portion of the gain. For example, if your ordinary taxable income is $30,000 (single filer), the first $18,350 of your long-term gains fits within the 0% zone (since $48,350 − $30,000 = $18,350). The remaining gains are taxed at 15%. This stacking rule makes your other income very relevant to the effective rate on your capital gains.

Question 5

Do capital losses reduce my taxes?

Accepted Answer

Yes. If you sell an asset at a loss, you can use that loss to offset capital gains of the same type (short-term losses offset short-term gains first, then long-term). If losses exceed gains, you can deduct up to $3,000 of the net loss against ordinary income per year. Unused losses carry forward indefinitely to future tax years. This is called tax-loss harvesting when done strategically.

Question 6

Is cryptocurrency subject to capital gains tax?

Accepted Answer

Yes. The IRS treats cryptocurrency as property, not currency. Every time you sell, exchange, or use crypto to pay for goods, it's a taxable event. The same short-term/long-term rules apply: held ≤1 year is short-term (ordinary income rates), held >1 year is long-term (preferential 0/15/20% rates). This calculator works for crypto gains the same way it works for stock or real estate gains.

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