Definition
Tax on the profit from selling an asset such as stock, crypto or property; assets held over a year get lower rates.
What it means
A capital gain is the difference between what you sell an asset for and its cost basis. Gains on assets held one year or less are short-term and taxed at ordinary income rates. Gains on assets held more than one year are long-term and taxed at 0%, 15% or 20%, depending on taxable income. For 2026, the 0% rate applies to taxable income up to $49,450 for single filers and $98,900 for joint filers, and the 20% rate starts above $545,500 single and $613,700 joint. Higher earners may also owe the 3.8% net investment income tax. Capital losses offset gains, and up to $3,000 of extra loss a year can reduce other income. Many homeowners can exclude up to $250,000 of gain on a main home, or $500,000 for joint filers.
Example
A single filer with $45,000 of taxable income in 2026, including a $3,000 long-term gain on shares held two years, pays 0% federal tax on the gain because total taxable income stays under $49,450.
Illustrative numbers only. Your situation will differ.