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Mastering Capital Gains Rates
Aaron Stegner
August 08, 2025
If you’re planning to sell capital assets (stocks, real estate, or other investments) understanding capital gains rates is key to maximizing your after‑tax returns.
Federal Capital Gains Tax Rates for Tax Year
Long-term capital gains apply to capital assets held more than one year. If you meet this holding requirement you can benefit from preferential federal rates of 0%, 15%, or 20%. The rate you pay is based on your taxable income and filing status. See brackets below.
Short‑term gains apply to capital assets held less than one year and are taxed as ordinary income tax brackets up to 37%.
Minnesota State Tax Treatment
Minnesota does not offer preferential capital gains rates. All net capital gains are added to your ordinary income and taxed up to 9.85%.
Other states have their own rules for capital gains rates.
Planning Tips & Strategies
Try to hold investments for over one year to qualify for the preferential rates.
Capital losses can offset capital gains. You can then deduct $3,000 each year of the unused loss annually. For more detail see my blog post Harvest Tax Losses
Coordinate sales in years with lower income to potentially fall into the 0% or 15% long‑term brackets.
Work with your financial advisor to consider how you should invest high return assets vs assets with more modest returns. Think pretax and post-tax retirement accounts and brokerage accounts.
There are exclusions for gains on your personal residences if you meet the requirements.
Watch out for Net Investment Income Tax (NIIT). You may owe an additional 3.8% on net investment income (including capital gains) when income exceeds certain thresholds.
2025 Capitals Gains Tax Brackets
Where your income falls in these ranges dictates what you pay for capital gains rates. Most common is the 15% rate. For example, if your income is $100,000 the 15% capital gain rates will apply to the gains you made on the sale of stock.
Single:
0% Rate – $0 to $48,350
15% Rate – $48,351 to $533,400
20% Rate - $533,401 and up
Married filing jointly:
0% Rate – $0 to $96,700
15% Rate – 96,701 to $600,050
20% Rate - $600,051 and up