Capital gains tax confuses people for one reason: the gain doesn't have its own tax bracket box you can look up. It gets stacked on top of your other income, split into long-term and short-term pieces, and possibly brushed with a 3.8% surtax. Run the stack in the right order and the math is surprisingly tidy. Here it is with real 2025 numbers.
Sell a capital asset, a stock, a fund, crypto, a rental property, for more than its basis (usually what you paid plus fees), and the profit is a capital gain. Held more than one year? Long-term, and it earns the preferential rates. A year or less? Short-term, and it's taxed exactly like wages, at your ordinary bracket of 10% to 37%.
Losses matter too. Capital losses offset gains dollar for dollar first, and up to $3,000 of net loss per year also wipes out ordinary income, with the rest carrying forward. That's the machinery behind tax-loss harvesting.
Three layers, filled in this order:
For 2025, the long-term breakpoints are:
| Taxable income (single) | Taxable income (married joint) | Long-term rate |
|---|---|---|
| Up to $48,350 | Up to $96,700 | 0% |
| $48,350 – $533,400 | $96,700 – $600,000 | 15% |
| Over $533,400 | Over $600,000 | 20% |
The income in that table includes the gain itself. That's the stacking at work: your salary decides where the gain starts, and the gain's size decides where it ends.
A single filer with $75,000 of taxable income sells $25,000 of index fund shares held for three years. Stack: the $25,000 gain sits from $75,000 to $100,000 of income, entirely inside the 15% band. Federal tax: $25,000 × 15% = $3,750, a 15.0% effective rate, no NIIT (more on that below). She keeps $21,250 of the gain.
Same filer, but a big year: $500,000 of income and a $100,000 long-term gain. The gain spans $500,000 to $600,000, which crosses the $533,400 breakpoint. The first $33,400 falls in the 15% band ($5,010) and the remaining $66,600 lands in the 20% band ($13,320). Total: $18,330, an 18.3% blended rate. Large gains routinely straddle a breakpoint, which is why single-rate mental math overestimates or underestimates the bill.
Enter income, long-term and short-term gains, and your state rate. Get the federal stack, NIIT, and effective rate.
Capital Gains Tax Calculator →Once modified adjusted gross income passes $200,000 single or $250,000 married filing jointly, the net investment income tax adds 3.8% on the smaller of your net investment income or the excess over the threshold. Example: $210,000 of income plus an $80,000 long-term gain. The 15% share is $12,000, MAGI is $290,000, the excess is $90,000, and the gain ($80,000) is smaller, so the NIIT applies to the whole gain: $3,040. Total $15,040, an 18.8% effective rate that surprises first-timers.
Notably, the NIIT can hit you even when your gain is entirely in the 15% band, and it operates on MAGI, not taxable income, so it starts a bit earlier than the brackets suggest.
Crypto uses the same two-tier system with three twists that trip people up.
The holding-period incentive is dramatic. An investor with $82,000 of income who took a $36,000 crypto profit owes $8,213 selling at 11 months but $5,400 at 13 months. Waiting two months across the one-year line saved $2,813.
Yes, literally stacked on top. Your ordinary income fills the regular 10% to 37% brackets first, short-term gains join it there, and long-term gains then stack above at their own 0%, 15%, or 20% breakpoints. That's why the same $25,000 gain can be taxed at 0%, 15%, or 20% depending on what else you earned.
In a regular brokerage account, yes. Selling stock and rebuying it, or swapping one crypto token for another, realizes the gain immediately; reinvesting doesn't defer it. Only tax-advantaged accounts like 401(k)s, IRAs, and Roths shelter trading gains, which is a strong argument for keeping your most active trading inside them.
The clock starts when you acquire the token and the long-term rate applies when you sell more than 365 days later. A $36,000 gain on $82,000 of income costs $8,213 if sold as a short-term gain but $5,400 if held past one year, a $2,813 difference. The 1099-DA reporting that started with tax year 2025 makes the dates matter even more.
This guide uses 2025 federal brackets for planning, not tax advice. State taxes, the 25% unrecaptured section 1250 rate for rentals, the 28% collectibles rate, and carryforwards all change the numbers; a CPA earns their fee on exactly those edge cases.