This is the sale price minus any commissions or fees paid. Subtract your basis (what you paid) from the realized amount (how much you sold it for) to determine the difference. ○ If you sold your assets for more than you paid, you have a capital gain.
Long-term capital gains tax rates for the 2025 tax year
For the 2025 tax year, individual filers won't pay any capital gains tax if their total taxable income is $48,350 or less. The rate jumps to 15 percent on capital gains, if their income is $48,351 to $533,400. Above that income level the rate climbs to 20 percent.
Determine the cost basis of your assets, which is the original value of the asset, plus any improvements and minus any depreciation. Subtract the cost basis from the selling price. The resulting number is your capital gain (or loss).
A few options to legally avoid paying capital gains tax on investment property include buying your property with a retirement account, converting the property from an investment property to a primary residence, utilizing tax harvesting, and using Section 1031 of the IRS code for deferring taxes.
Current tax law does not allow you to take a capital gains tax break based on your age. In the past, the IRS granted people over the age of 55 a tax exemption for home sales, though this exclusion was eliminated in 1997 in favor of the expanded exemption for all homeowners.
Use a 1031 Exchange to Defer Capital Gains
It's a popular way to defer capital gains taxes when selling a rental home or even a business. Often referred to as a “like-kind” exchange, this tax deferment strategy is defined in Section 1031 of the Internal Revenue Code.
Gains on the sale of personal or investment property held for more than one year are taxed at favorable capital gains rates of 0%, 15%, or 20%, plus a 3.8% net investment income tax for people with higher incomes. The capital gains rates are based on set income thresholds, which are adjusted annually for inflation.
A capital gains rate of 0% applies if your taxable income is less than or equal to: $47,025 for single and married filing separately; $94,050 for married filing jointly and qualifying surviving spouse; and. $63,000 for head of household.
To calculate your capital gain or loss, you need to subtract the original cost of the asset and any associated expenses from the selling price. The remaining amount is your capital gain (if positive) or capital loss (if negative).
This tax is applied to the profit, or capital gain, made from selling assets like stocks, bonds, property and precious metals. It is generally paid when your taxes are filed for the given tax year, not immediately upon selling an asset.
If it's between $47,026 and $518,900 as a single filer, or between $94,051 and $583,750 if married and filing jointly, you would pay 15 percent on the $250,000 profit. Above those top amounts, the capital gains rate would be 20 percent.
While capital gains may be taxed at a different rate, they're still included in your adjusted gross income (AGI) and can affect your tax bracket and your eligibility for some income-based investment opportunities.
This tax loophole allows property owners to defer capital gains on their sale as long as the proceeds are used to purchase another property within a set time frame.
If you like your rental property enough to live in it, you could convert it to a primary residence to avoid capital gains tax. There are some rules, however, that the IRS enforces. You have to own the home for at least five years. And you have to live in it for at least two out of five years before you sell it.
When selling the rental property, the investor will subtract the adjusted cost basis from the sale price to determine the capital gain. If the property sells for $350,000, the capital gain would be $350,000 (sale price) – $280,000 (adjusted cost basis) = $70,000. This $70,000 is the capital gain for tax purposes.
Key takeaways. Seniors must pay capital gains taxes at the same rates as everyone else—no special age-based exemption exists.
The capital gains exclusion applies to your principal residence, and while you may only have one of those at a time, you may have more than one during your lifetime. There is no longer a one-time exemption—that was the old rule, but it changed in 1997.
Taxes aren't determined by age, so you will never age out of paying taxes. People who are 65 or older at the end of 2024 have to file a return for tax year 2024 (which is due in 2025) if their gross income is $16,550 or higher.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
If you are inheriting a house that is paid off, in most cases, you will still need to go through probate. Some states may allow you to bypass probate if a quitclaim deed was executed properly. However, it is likely that you will still need to go through probate even if you are inheriting a house with no mortgage.