To avoid or minimize a 20% capital gains tax, hold investments for over a year, utilize tax-advantaged accounts (IRA, 401(k)), and use tax-loss harvesting to offset gains. Additional strategies include donating appreciated securities, selling assets during low-income years, or using the primary residence exclusion of up to $ 500 , 000 $ 5 0 0 , 0 0 0 .
Long-term capital gains — that is, on assets held for a year or longer — are taxed at a 0%, 15% or 20% rate, depending on your total taxable income for the year. Those rates are in effect for the 2024, 2025 and 2026 tax years.
Capital gains tax rates
A capital gains rate of 0% applies if your taxable income is less than or equal to: $48,350 for single and married filing separately; $96,700 for married filing jointly and qualifying surviving spouse; and. $64,750 for head of household.
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%).
How can I reduce capital gains taxes?
Capital gains tax on $100,000 depends on if the gain is short-term (held a year or less, taxed as regular income at 10-37%) or long-term (held over a year, taxed at 0%, 15%, or 20% federally), plus potential state taxes and the Net Investment Income Tax (3.8%) for high earners. For long-term gains, a $100k profit could fall into the 15% bracket for many filers, meaning around $15,000 in federal tax, but your total income matters.
The primary "one-time" capital gains exemption in the U.S. allows single filers to exclude up to $250,000 (or $500,000 for married couples filing jointly) of profit from selling their main home, provided they've owned and lived in it for at least two of the last five years before the sale. While it's often called a one-time exclusion, you can use it multiple times, but you must wait two years before claiming it again on another property.
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.
Capital improvements: Improvements that add value to your home or prolong its useful life can reduce the amount of capital gains tax you owe when you sell your home, but won't be immediately deductible.
Second, capital gains taxes on accrued capital gains are forgiven if the asset holder dies—the so-called “Angel of Death” loophole. The basis of an asset left to an heir is “stepped up” to the asset's current value.
Capital gains tax on $300,000 depends on your filing status and other income, but for 2025, it's mostly 15%, with some portions potentially taxed at 0% or 20%, plus a potential 3.8% Net Investment Income Tax (NIIT) if your income is high enough; for example, a single filer might pay 0% on the first ~$48k, 15% on the next portion, and 20% on amounts above ~$533k, while married filing separately would hit the 20% bracket after $300k.
A common way to defer or reduce your capital gains taxes is to use tax-advantaged accounts. Retirement accounts such as 401(k) plans, and individual retirement accounts offer tax-deferred investment. You don't pay income or capital gains taxes on assets while they remain in the account.
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.
To qualify for 0% capital gains tax, you must have long-term capital gains (assets held over a year) and your taxable income (after deductions) must fall below specific IRS thresholds, which change annually but are roughly <$48,350 for single filers and <$96,700 for married filing jointly for the 2025 tax year, allowing for higher total income when combined with deductions like the standard deduction. The key is keeping your adjusted gross income (AGI) low enough so that after subtracting deductions, your taxable income remains within these limits.
The simplest way to avoid capital gains tax is to regularly use your capital gains tax allowance (officially known as your annual exempt amount or AEA). How easy this is to do depends on the assets you are selling.
Do I Pay Capital Gains if I Reinvest the Proceeds From the Sale? While you'll still be obligated to pay capital gains after reinvesting proceeds from a sale, you can defer them. Reinvesting in a similar real estate investment property defers your earnings as well as your tax liabilities.
If you have realized capital gains, you can offset them by selling securities from one of your taxable accounts at a loss and reinvesting the money in a similar investment or rebalancing, if needed. When reinvesting the funds, it's important to be aware of the IRS wash-sale rule.
A Living Trust Does Not Eliminate Capital Gains Taxes
Another common myth is that putting a home or investments in a trust removes capital gains tax obligations. However: If you sell an asset while it's in a revocable living trust, you still owe capital gains tax on any profit.