Chris Rock once joked, “You don’t pay taxes—they take taxes.” That may feel especially true when investment gains create an unexpected tax bill.
Capital gains and losses are an important part of investing, especially for individuals and families with taxable brokerage accounts, real estate, business interests, or concentrated stock positions. Understanding how gains and losses work can help you make more informed decisions and avoid surprises at tax time.
At True North Wealth Management, we believe investment decisions should be made with both portfolio strategy and tax awareness in mind.
What Are Capital Gains?
A capital gain occurs when you sell an investment or asset for more than you paid for it.
For example, if you purchased an investment for $10,000 and later sold it for $15,000, you would generally have a $5,000 capital gain before considering any adjustments, fees, or tax rules that may apply.
Capital gains are generally divided into two categories:
Short-term capital gains apply to assets held for one year or less.
Long-term capital gains apply to assets held for more than one year.
This distinction matters because short-term and long-term gains are taxed differently.
Short-Term vs. Long-Term Capital Gains
Short-term capital gains are generally taxed at ordinary income tax rates. In other words, the gain is treated similarly to wages, business income, or other ordinary taxable income.
Long-term capital gains are generally taxed at preferential rates of 0%, 15%, or 20%, depending on taxable income and filing status. The IRS notes that for most individuals, the tax rate on net capital gain is no higher than 15%, though higher-income taxpayers may be subject to the 20% rate or additional taxes.
2025 Long-Term Capital Gains Tax Brackets
For 2025, the long-term capital gains brackets are generally as follows:
| Tax Rate | Single | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 0% | $0 – $48,350 | $0 – $96,700 | $0 – $64,750 |
| 15% | $48,351 – $533,400 | $96,701 – $600,050 | $64,751 – $566,700 |
| 20% | $533,401+ | $600,051+ | $566,701+ |
These brackets are based on taxable income, not gross income. Your actual tax result may depend on deductions, other income, filing status, state taxes, and the type of asset sold.
The Net Investment Income Tax
Some higher-income taxpayers may also owe the 3.8% Net Investment Income Tax, often called NIIT.
The NIIT may apply when a taxpayer has net investment income and modified adjusted gross income above certain thresholds. The IRS lists the thresholds as $200,000 for single filers and heads of household, $250,000 for married filing jointly, and $125,000 for married filing separately.
Net investment income can include capital gains, dividends, interest, rental income, royalty income, and certain annuity income.
Special Rules for Certain Assets
Not all capital gains are taxed the same way.
For example, long-term gains on collectibles, such as certain coins, art, antiques, and precious metals, may be taxed at a maximum federal rate of 28%. Real estate, business interests, inherited assets, and assets with depreciation may also involve additional rules.
Because the tax treatment can vary, it is important to review the asset type before selling.
How Capital Losses Work
A capital loss occurs when you sell an investment for less than you paid for it.
Capital losses may be used to offset capital gains. If your capital losses exceed your capital gains, you may generally use up to $3,000 of excess capital losses to offset other income in a tax year. If losses exceed that amount, they may generally be carried forward to future tax years. The IRS explains that unused capital losses can be carried over to later years and treated as if they occurred in that later year.
This is why tax-loss harvesting can be a useful planning tool in some situations. However, it must be handled carefully, especially because wash-sale rules and other tax rules may limit the ability to claim certain losses.
Why Tax Planning Matters Before You Sell
Capital gains taxes can affect the true return on an investment.
Before selling an appreciated asset, it may be helpful to consider:
Whether the gain is short-term or long-term
Your expected taxable income for the year
Whether the sale may trigger NIIT
Whether you have capital losses available
Whether charitable giving strategies may apply
Whether the asset is held in a taxable or tax-advantaged account
Whether selling over multiple tax years may make sense
How the sale fits your overall investment plan
The goal is not to let taxes control every investment decision. The goal is to make informed decisions so taxes do not become an afterthought.
A Tax-Aware Investment Strategy
At True North Wealth Management, we help clients think beyond investment performance alone. A portfolio should be reviewed not only for growth, income, and risk, but also for tax efficiency.
That may include coordinating investment decisions with retirement income planning, charitable giving, estate planning, required minimum distributions, and capital gains management.
Review Before You Realize a Gain
Selling an investment can be the right move, but it is worth understanding the tax impact before the sale takes place.
If you are considering selling appreciated investments, reviewing a concentrated stock position, preparing for retirement income, or looking for ways to manage capital gains, True North Wealthttps://www.truenorthwm.com/contact/h Management can help you evaluate your options.
A thoughtful review can help you understand the potential tax consequences, avoid unnecessary surprises, and build a strategy that supports your long-term financial goals.
Important Disclosures:
This material is for informational purposes only and is not intended as tax, legal, or individualized investment advice. Tax laws and rates are subject to change. Please consult qualified tax and legal professionals regarding your individual situation. Investment returns and principal values fluctuate with market conditions, and investments may be worth more or less than their original cost when sold.
1. IRS.gov, 2025
2. IRS.gov, 2025
3. IRS.gov, 2025
4. IRS.gov, 2025
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite and customized by True North Wealth Management LLC to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.