Capital Gains Tax Brackets

Capital gains tax brackets are the income ranges that determine the specific tax rate applied to long-term capital gains. These brackets are adjusted annually based on inflation and the investor's total taxable income.

Because the rates are progressive, an investor's total income, including wages and other investments, influences the tax rate applied to their capital gains. Understanding these brackets is essential for tax planning, as it allows investors to estimate their tax liability before selling an asset.

Some investors may choose to delay a sale to a year when their income is lower to benefit from a lower capital gains tax bracket. It is a key factor in the strategic timing of portfolio liquidations.