Capital gains tax on selling stocks

Short-term vs long-term

Shares held for a year or less produce a short-term gain, taxed as ordinary income at up to 37%. Shares held for more than a year produce a long-term gain, taxed at 0%, 15% or 20%. For a single filer earning $60,000, a $20,000 gain costs $3,750 in federal tax if sold short-term and $2,168 if sold long-term.

Cost basis

Your gain is the sale proceeds minus your cost basis: what you paid, including fees, plus any reinvested dividends. Your broker reports both on Form 1099-B. If you bought the same stock at different times, choosing which lots to sell (specific identification) can lower the gain.

Using losses

• Losses offset gains of the same type first, then the other type.
• Net losses beyond your gains reduce ordinary income by up to $3,000 a year ($1,500 if married filing separately).
• Anything left carries forward to future years with no time limit.
• Wash sale rule: if you buy the same or a substantially identical stock within 30 days before or after selling at a loss, the loss is disallowed for now and added to the basis of the new shares.

Ways people legally reduce the bill

• Waiting past the one-year mark before selling.
• Selling in a low-income year, when some gains may fall in the 0% bracket (up to $49,450 of taxable income for single filers in 2026).
• Harvesting losses to offset gains.
• Giving appreciated shares to charity instead of cash.
• Holding investments in IRAs and 401(k)s, where trades are not taxed each year.

Worked figures: $10,000 · $50,000 · $100,000. Other guides: selling a house · crypto.