A Guide to Capital Gains Tax Rates in 2025

Not all countries tax capital gains.

In fact, some of the world’s top financial hubs, like Switzerland, Singapore and Hong Kong, intentionally eschew them in favour of attracting global wealth.

The United States, however, takes a very different approach.

For US taxpayers, capital gains represent a significant – and often misunderstood – tax liability. With a complex web of federal and state-level rules, navigating the Internal Revenue Service (IRS) treatment of capital gains requires careful planning and up-to-date knowledge.

At the federal level, your capital gains tax depends on three key factors:

• How long you’ve held the asset
• The size of your net gains
• Your overall taxable income.

However, additional rules can also apply, depending on the type of asset, your state of residence, and how the gain is realised.

So, things are complicated in the US for high-net-worth individuals (HNWIs), and as ever, complexity can come at a cost.

Without a clear understanding of how and when capital gains are taxed, selling appreciated assets can trigger unexpected tax consequences that erode your returns.

Fortunately, this kind of problem normally has a solution. With the right timing and structure, it’s usually possible to reduce or defer tax liabilities. But if you don’t act promptly or you wait until the asset is sold, then your options will be limited.

So, the Nomad Capitalist team has put together an in-depth guide for US taxpayers that explains capital gains rules and explores proven strategies for reducing financial exposure and retaining more of your hard-earned cash.

What is Capital Gains Tax?

Capital Gains Tax (CGT) is a tax paid on any profits made when you sell an asset. 

It’s typically charged as a percentage of the profit made between you owning the asset and selling it. This ‘gain’ is calculated by subtracting the asset’s cost basis from the sale price. 

You’ll usually be taxed annually based on your net gain from taxable assets sold during a tax year. 

However, in the United States, at least, if you make a large profit on the sale of an asset, you may need to estimate your tax payments throughout the year instead of waiting until your annual tax return is filed.  

Taxable assets include real estate, stocks and shares, precious metals, cryptocurrency, business assets, collectables or valuable personal possessions.   

Who Pays Capital Gains Tax in the United States?

If a US citizen sells a taxable asset at a profit, this must be reported on their tax return to the IRS, and capital gains tax could be due.

This remains true no matter where the asset is based or where the US citizen lives.  

Similarly, if someone sells a US SITUS asset at a profit, they must report the sale to the IRS as capital gains tax may be owed, even if they’re not a US citizen or don’t live in the United States.

Federal Capital Gains Tax

If you’ve held an asset for less than a year before selling it, the profit is considered a short-term gain and will be taxed as regular income based on federal income tax brackets. 

If you’ve held the asset for at least a year, the profit is considered a long-term gain and will be taxed according to federal capital gains tax brackets.

These tax brackets are based on your total taxable income for the tax year, and they include a 0% bracket for low-income earners. 

Total taxable income includes income from working, capital gains and other investments, among other things. Still, if your annual taxable income is less than US$11,925 (in 2025), you’ll potentially owe no tax, depending on the capital gain amount.

You can also use capital losses to offset your capital gains, and these losses can be carried forward to a new tax year if necessary. Short-term losses can only offset short-term gains, while long-term losses must offset long-term gains. 

In any case, if your losses outweigh your gains for any tax year, you’ll owe no capital gains tax in that year. 

State Capital Gains Tax

Most US states charge capital gains tax, but a handful don’t and these include: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas and Wyoming.

If you’re not a resident of one of these states or the asset you’re selling is based there, capital gains tax may be due at a state level. 

Again, this is true regardless of whether or not you’re a US citizen or you live in the state. Indeed, you can still be considered a resident of a US state if you have ‘ties’ such as a family home, voter registration or business interests there.

US Capital Gains Tax Rates for 2025

Several factors determine the capital gains tax rate you’ll pay in 2025. 

We cover the permutations below. 

Short Term Capital Gains Tax Rate 2025

Profits on assets held for less than a year are considered short-term gains and taxed as regular income.

The rate you’ll pay on this gain will, therefore, depend on how much income you have been paid from your job or business, for example. 

US federal income tax is a progressive tax, and you’ll pay varying rates on different portions of your income. 

For example, if your total income for the 2025 tax year is US$48,000, you’ll pay 10% on your first US$11,925 and 12% on the remaining US$36,075. 

Long Term Capital Gains Tax 

Profits on assets held for at least a year are considered long-term gains and are taxed at federal capital gains tax rates.

These tax brackets are based on your total taxable income for the tax year, which includes any capital gains. 

So, if you made US$5,000 worth of capital gains, but your total taxable income is US$600,000, you’ll pay 20% tax on the entire gain, which equates to US$1,000. 

On the bright side, if you made US$47,000 worth of capital gains and your total taxable income is US$47,000, you’ll pay no capital gains tax. 

State Capital Gains Tax

Each state applies its own rates and regulations. Many charge capital gains as regular income, but others have specific CGT rates. 

Net Investment Income Tax (NIIT)

NIIT is a separate tax on high earners based on income from all investments, including short-term and long-term capital gains, as well as dividends, rental income, royalty income and more. 

You’ll pay this tax if your Modified Adjusted Gross Income (MAGI) is above the NIIT threshold, which is US$200,000 for single filers or US$250,000 for married couples filing together. 

The tax rate is 3.8%, which you’ll pay on the lower of the following

• Your total net investment income for the tax year
• Your MAGI exceeding the NIIT threshold.

For example, if you make US$5,000 capital gains and earn US$600,000 in MAGI, the amount that exceeds the NIIT threshold is US$400,000. 

In this case, your net investment income is the lower figure (by some distance), so your NIIT bill for that tax year will be 3.8% of US$5,000. 

CGT Exceptions

There are some capital gains tax rules that only apply to certain types of assets. 

For example, if you sell real estate that qualifies as your primary residence, you’ll be given a capital gains tax exemption that applies to your first US$250,000 of gains if you’re a single filer or US$500,000 for married couples filing jointly. 

You can also defer your capital gains tax liability when selling an investment property by activating a 1031 exchange.  

On the other hand, if you’re selling assets that are considered collectables, the maximum tax rate you could pay is 28% (rather than 20% for other assets).   

There are some special rules for selling cryptocurrency. For example, the ‘wash sale rule’, which prevents investors from claiming losses on assets they sold and then re-bought 30 days later, doesn’t currently apply to crypto assets. 

However, speculation is rife the US government will introduce new crypto tax rules in the near future, so it’s worth keeping an eye on. 

How to Lower Your Capital Gains Tax Rate

• Hold your assets for over a year: If you sell an asset after less than a year, it’s taxed as regular income and high earners could pay as much as 37% on the gain. If you hold it for at least a year before selling, it’s classified as a long-term gain and the highest rate you’ll pay is 20%.
• Time your sale strategically: Your capital gains tax rate depends on your overall income for the tax year. That means you could reduce your capital gains tax liability by selling items in a year where you’ve earned less income. This could make a particularly significant difference if it drops you into a lower tax bracket.  
• Offset your capital losses: The American tax system allows you to offset your capital losses to reduce your overall capital gains tax liability. Short-term losses can only offset short-term gains, while long-term losses must offset long-term gains. These losses can be carried forward to future tax years if necessary. Capital losses can also be used to offset up to US$3,000 of your income tax liability per year.
• Primary Residence Exemption:  You’ll receive a significant capital gains tax exemption when selling real estate if it’s your primary residence. A property is considered your primary residence if you’ve lived there for two years out of the previous five. That’s 730 days in total, and they don’t need to be consecutive. Some investors choose to live in their property before they sell it to make use of the primary residence exemption. However, you can only claim this exemption once every two years.  

Claiming Tax Deductions

Tax deductions can be claimed on certain types of home improvements, including:

• Capital improvements
• Energy-efficient home improvements 
• Medically necessary home improvements. 

Renouncing US Citizenship 

The United States is one of only two countries in the world with a citizenship-based taxation system. This means that US citizens are liable to pay tax on their worldwide income and capital gains, regardless of where in the World they live. 

While there are methods to reduce your capital gains tax liability, the only way to truly escape your obligations to the IRS is to renounce your US citizenship, which may open the door for you to become a tax resident in a country with 0% capital gains tax.  

Still, renouncing your US citizenship is an irreversible decision with long-term consequences, so you should take time to consider the pros and cons. 

You may owe exit tax upon renouncing your US citizenship and you’ll still be taxed on gains from US SITUS assets, so it’s not the best move for everyone. 

Those who don’t want to renounce may prefer to move to Puerto Rico, where your  CGT liability could fall to 0%. Moving to a more tax-friendly US state, could also reduce your  CGT liability at the state level.

US Capital Gains Tax Rate 2025: FAQs

Find Tax-Friendly Alternatives to the US

If you’re staring down a six- or seven-figure CGT bill, you’re not alone – and you’re not without options.

As outlined above, there are legitimate and well-proven strategies to reduce or defer your US capital gains liability.

But these solutions aren’t a quick fix – they require foresight, timing and international expertise.

For some, that might mean restructuring assets offshore while, for others, it could involve establishing tax residency in a more favourable jurisdiction. Maybe it will mean renouncing US citizenship entirely.

That’s why so many HNWIs turn to Nomad Capitalist – they want to legally reduce their CGT exposure and design a lifestyle that aligns with their goals of financial efficiency, mobility and freedom.

But tax optimisation doesn’t happen by accident: It takes careful planning and good advice and that usually means you need the right team behind you.

Our clients are paired with specialists in tax, asset protection, global investment and citizenship strategy to build a personalised plan that protects their long-term wealth.

So, if you’re ready to take control of your capital gains tax burden – and build a smarter, more global life – get in touch. We’ll help you go where you’re treated best.