President Biden has not yet enacted, but has consistently proposed, significant increases to the capital gains tax, targeting a top rate of 44.6% for high earners in his fiscal year 2025 budget, up from the current 20%. These proposals focus on increasing taxes for individuals earning over $1 million, aiming to align long-term capital gains rates with ordinary income rates.
President Biden has formally proposed the highest top capital gains tax in over 100 years. Here is a direct quote from the Biden 2025 budget proposal: “Together, the proposals would increase the top marginal rate on long-term capital gains and qualified dividends to 44.6 percent.”
An increase in the capital gains inclusion rate from ½ to 2/3 as of January 1, 2026, excluding the first $250,000 for individuals. The effective date was delayed from June 25th 2024, to January 2026. Both major parties have now pledged to abandon this tax hike.
Impact: While the rates stayed the same, the new tax law changed the income thresholds where those rates kick in due to annual inflation adjustments. So, for 2026, a married couple can earn up to $98,900 in total taxable income and still pay 0% in federal capital gains tax.
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
No, the core federal long-term capital gains tax rates (0%, 15%, 20%) are not changing in 2025 due to the major tax bill signed in mid-2025, but new deductions and inflation adjustments slightly shift the income thresholds, potentially expanding the 0% bracket for some taxpayers, with Washington State also seeing local changes.
Use your principal residence exemption
Your principal residence is exempt from the capital gains tax. To claim this exemption, make sure: You own the home, alone or jointly. You've designated the property as your principal residence with the CRA.
Your capital gain (profit) is $200,000. Your taxable capital gain with the 50% discount applied is $100,000. Your estimated capital gains tax obligation is $37,175.
The "6-year rule" for Capital Gains Tax (CGT) in Australia allows you to treat a former main residence as tax-exempt for up to six years after you move out, even if you rent it out, enabling you to avoid CGT on any growth during that period. You qualify by moving out, choosing to treat it as your main home for tax, and can reset the rule by moving back in. If you rent it out for longer than six years, only the portion of the gain after the six-year mark becomes taxable.
Rep. Craig Goldman (R-Texas) introduced legislation this week, dubbed the Don't Tax the American Dream Act, that would eliminate federal capital gains taxes on the sale of primary residences.
You can avoid or minimize capital gains tax by holding assets over a year for lower long-term rates, using tax-advantaged accounts (like Roth IRAs/401(k)s), donating appreciated assets to charity, using tax-loss harvesting to offset gains, or leveraging primary residence exclusions for your home, but completely avoiding tax often involves specific strategies like Qualified Opportunity Zones or 1031 exchanges for real estate.
Seven major tax cuts took effect for 2025 under the OBBBA:
Long-Term Capital Gains tax rate is 12.5% and Short-Term Capital Gains tax rate is 20% or at slab rates as updated in Budget 2024. Profit on sale of capital assets such as land, building and stocks are subject to capital gains tax.
Capital Gains Tax Rates
Denmark has the world's highest rate at 42%. Other European countries also have significantly high rates, including Norway at 37.8% and France at 34%. A number of European Union nations, including Belgium, Czech Republic, Switzerland and Turkey, have no capital gains tax.
When you sell your primary residence, $250,000 of capital gains (or $500,000 for a couple) are exempted from capital gains taxation. This is generally true only if you have owned and used your home as your main residence for at least two out of the five years prior to the sale.
As already mentioned, some assets are specifically exempt from CGT. Some of the most common examples are: private motor cars, including vintage cars. gifts to UK registered charities.
Avoiding Capital Gains Tax: Strategies to avoid or reduce capital gains tax on real estate include waiting at least a year before selling a property (qualifying for long-term capital gains), taking advantage of primary residence exclusions, rolling profits into a new investment via a 1031 exchange, itemizing expenses, ...
On the other hand, frequently buying, renovating, and selling properties to make a profit is more like operating a business, in the eyes of the Canada Revenue Agency. As of January 1, 2023, there are new rules if you own a housing unit (including a rental property) for fewer than 365 consecutive days.
The main difference is the timing of those tax charges. For example, when you provide a gift, you can choose the timing of that disposition to minimize the taxes owed. However, if you leave an inheritance, your estate will pay the taxes based on the market value at your date of death.
On a $100,000 capital gain, you'll likely pay 15% for long-term gains, resulting in about $15,000 in federal tax (plus potential state tax), but it could be 0% or 20% depending on your total taxable income and filing status, while short-term gains are taxed as ordinary income (potentially 22-24%).
Individual tax proposals
President Biden's proposal to increase the top individual ordinary income tax rate to 39.6% is projected to raise $245.9 billion over 10 years. The proposal to tax capital gain income for high earners at ordinary rates is projected to raise $288.5 billion over the same period.