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

Short-term gains (assets held under 1 year) are taxed as ordinary income (10-37%). Long-term gains (held over 1 year) receive preferential rates: 0%, 15%, or 20% based on income. Holding investments just over one year can cut your tax rate in half. This is why buy-and-hold strategies are tax-efficient.

How much are capital gains taxes?

Long-term capital gains rates for 2024: 0% if taxable income under $47,025 single/$94,050 married; 15% for income up to $518,900 single/$583,750 married; 20% above those thresholds. Short-term gains are taxed at your ordinary income rate (10-37%). High earners also pay 3.8% Net Investment Income Tax on capital gains.

Can I avoid paying capital gains tax?

Strategies to minimize capital gains: Hold investments over 1 year for lower rates, use tax-loss harvesting (sell losers to offset gains), contribute appreciated assets to charity, defer gains with 1031 exchanges (real estate), or use opportunity zone investments. Primary residence sales under $250k single/$500k married are tax-free if owned 2+ years.

What is tax-loss harvesting?

Tax-loss harvesting means selling losing investments to offset capital gains from winners. You can offset unlimited gains with losses. Excess losses offset up to $3,000 of ordinary income annually, with remaining losses carried forward indefinitely. Be aware of wash-sale rules—you can't rebuy the same security within 30 days.