Making money on your investments is a great feeling. The only downside is the capital gains tax you have to pay on your earnings when you sell.
Each year, the capital gains tax brackets get a bit of an adjustment to account for inflation — but they can still take a chunk out of your profits. For 2025, “single filers can have $48,350 in taxable income or $96,700 for married couples filing jointly and still pay 0% capital gains taxes,” said CNBC. But for single filers who earn $48,351 to $533,400 ($96,701 to $600,050 for those married filing jointly), a 15% capital gains tax applies. Those who are single filers earning $533,401 or more ($600,051 or more for those married filing jointly) will pay 20% tax.
The good news for those who still fall into brackets where capital gains tax applies? There are three steps you can take to minimize the amount you pay.
1. Use your losses to offset your gains
A “time-tested way to minimize the capital gains tax is through tax-loss harvesting,” which involves “selling a stock, bond or mutual fund at a loss, then using that loss to offset a gain on some other position in your portfolio,” said Kiplinger.
Here is an example of how that works in practice: “Say you own two stocks, one worth 10% more than you paid for it, while the other is worth 5% less. If you sold both stocks, the loss on the one would reduce the capital gains tax that you would owe on the other,” said Investopedia.
If you are in an investment scenario where “your capital losses exceed your capital gains, you can use up to $3,000 of it to offset ordinary income for the year,” said Investopedia, and then “after that, you can carry over the loss to future tax years until it is exhausted.”
2. Take advantage of tax-advantaged accounts
If you have access to tax-advantaged investment accounts — think 401(k) plans, IRAs, 529 plans and HSAs — then “being thoughtful and intentional with which accounts you save into and the investment selections within each type of account can help trim your tax burden,” said NerdWallet.
For instance, you might “use tax-advantaged accounts for more actively traded positions or less tax-efficient investments” and then “direct your buy-and-hold investments or more tax-efficient investments into taxable brokerage accounts,” said NerdWallet. In retirement accounts in particular, you “can buy and sell stocks, bonds and other assets without triggering capital gains taxes,” said SmartAsset.
Your contributions to tax-advantaged accounts can also serve as a way to lower your taxable income. Since the determining threshold for capital gains taxes is “total taxable income, which is adjusted gross income minus deductions,” as opposed to your salary, said Bankrate, you are “able to contribute to a retirement account — a 401(k) or IRA, for example — and reduce your taxable income, make other adjustments and then subtract your deduction before you arrive at taxable income.”
3. Aim to hang onto investments for the long-term
Another key to minimizing the amount you pay in capital gains taxes is investing for the long term. When you “sell positions that are at least a year old,” you will “pay the more favorable long-term capital gains tax rates instead of short-term capital gains tax rates,” said NerdWallet.
While long-term capital gains are taxed at the rates mentioned above — 0%, 10% or 15% — “short-term capital gains are taxed as ordinary income and “can go up to 37% in 2024, depending on your tax bracket,” said Investopedia.
This underscores why watching your holding periods can be so important. “If you are selling a security that you bought about a year ago, be sure to find out the trade date of the purchase,” said Investopedia, as “waiting a few days or weeks to qualify for long-term capital gains treatment might be a wise move as long as the investment’s price is holding relatively steady.”