Capital gains tax rates for 2025 have been adjusted to account for inflation, resulting in slight increases in income thresholds across all filing statuses. This is a simple update on the Capital gains tax rates for 2025, particularly in the sale of real estate. Here’s an updated overview:
Scroll to the bottom for more info on ‘what are capital gains’ and/or view our more detailed article on capital gains in real estate sales here.
For additional details on Capital Gains in real estate, including use of the IRS Section 121 Exclusion (aka the Homeowners Exemption or Homeowners Exclusion) Saving $250,000 or $500,000 of taxable gains, and what else can be deducted, read our full article here.
Those selling in Newport Beach, Eastside Costa Mesa and other Coastal Orange County and high property value locations through California should be aware of the significant potential tax implications of their sale. Indeed, These *in our opinion* high capital gains rates simply keep people in their homes, or otherwise not selling, contributing greatly to the supply and demand problem that lends to higher and higher cost.
What are Capital Gains Tax Rates for 2025?
Long-term capital gains tax rates for the 2025 tax year are as follows:
(note – IRS capital gains rates are based on your total income for the year, including the capital gain, but only the capital gain is then subject to the below rate, your other income will be subject to different / ‘regular’ rules):
Single Filers:
- Up to $48,350 – 0% capital gains tax rate
- $48,351–$533,400 – 15% capital gains tax rate
- Over $533,400 – 20% capital gains tax rate
Married Filing Jointly:
- Up to $96,700 – 0% capital gains tax rate
- $96,701–$600,050 – 15% capital gains tax rate
- Over $600,050 – 20% capital gains tax rate
Head of Household:
- Up to $64,750 – 0% capital gains tax rate
- $64,751–$566,700 – 15% capital gains tax rate
- Over $566,700 – 20% capital gains tax rate
These 2025 thresholds reflect adjustments for inflation and are slightly higher than the 2024 thresholds.
Need 2024 numbers – check out our article on 2024 capital gains rates here.
Thus the highest federal capital gains rate is currently 20%.
Don’t Forget The Affordable Care Act, aka “Obamacare” Tax
On top of that, The Affordable Care Act, aka “Obamacare” imposed a Medicare Tax on long term capital gains for high income earners, those with a modified adjusted gross incomes over $200,000 for individuals and $250,000 for married couples of an additional 3.8%.
Don’t Forget The California (or other state) Tax
Additionally, California (and some other states) will want their tax too! California will treat the capital gains as ordinary income for tax purposes (i.e. it just gets added on top of whatever else you make, and the total amount is treated as your taxable income). The greater the amount, the greater the risk of being pushed into California’s highest tax bracket of 13.3%. (Note, the top California income tax rate effective January 1, 2024, is an eye-watering 14.4%. The new 14.4% rate is the result of no limit on California’s 1.1% employee payroll tax for State Disability Insurance. Thus a 14.4% rate for those earning over $1 million.)
Therefore, the worst case, for high profits (or high earners) in California, capital gains taxes are up to 38.2%. That’s over a full one-third of the gain, out the window, in taxes.
What are Capital Gains Taxes?
Generally speaking, any ‘profit’ on the sale of your primary residence (i.e. the difference between what you paid for it, and what you sell it for, less expenses and other allowable deductions) will be taxed as “capital gains.”
Capital Gains Taxes are simply another tax. Even though the money you used to purchase the property and make the mortgage payments were already taxed, there are additional taxes now due at the time of sale, called “capital gains.”
So, if you purchased your home for $100,000 and sold it many years later for $1,000,000, you essentially have $900,000 in “capital gains” on that sale.
The IRS Section 121 exclusions are significant potential savings; but, if your profit is well over those allowances, you will still owe capital gains taxes, potentially significant amounts. This fear of taxation is one of the many factors contributing to our tight housing supply, i.e. people do not want to sell knowing they will have to pay capital gains taxes on their profits, even if they buy a new home.
For additional details on Capital Gains in real estate, including use of the IRS Section 121 Exclusion (aka the Homeowners Exemption or Homeowners Exclusion) Saving $250,000 or $500,000 of taxable gains, and what else can be deducted, read our full article here.
Contact Lucas Real Estate Today
If you’re preparing to sell property in Newport Beach, Costa Mesa, or nearby communities like Huntington Beach or Laguna Beach, trust Lucas Real Estate to handle your transaction with precision and professionalism. From understanding taxation issues, to disclosure exemptions to fulfilling your obligations, we ensure a smooth and compliant sale.
For more insights and professional real estate services in Newport Beach, Costa Mesa, and the coastal areas of Orange County, contact Lucas Real Estate today. Let us guide you through your next property transaction with confidence and clarity.
Contact us anytime via phone (949-478-1623) or email ([email protected])
– Devin Lucas
Author Devin R. Lucas is Real Estate Professional – a Real Estate Broker, Real Estate Attorney, and REALTOR® – specializing in Newport Beach, Costa Mesa and Orange County coastal communities, serving individuals and Trustees in residential real estate.
Lucas Real Estate – Attorney Devin Lucas and CPA Courtney Lucas – are experts in California Real Estate sales, capital gains issues and property tax matters including Propositions 13, 58, 193, 60, 90 and new Proposition 19.
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Lucas Real Estate is a unique full-service residential real estate brokerage providing related residential real estate legal services and real estate tax considerations and planning, based in Newport Beach, California. | Devin Lucas is a licensed California Real Estate Attorney, Real Estate Broker and REALTOR® | Courtney Lucas is a California licensed CPA and REALTOR®
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Sources:
- https://taxfoundation.org/statetaxindex/states/california/
- https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates
- https://www.bankrate.com/investing/long-term-capital-gains-tax/#what-is-the-long-term-capital-gains-tax-rate
- https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2025
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