At What Income Level Do You Not Have to Pay Capital Gains Taxes?

Real estate investors know that capital gains taxes can take a pretty hefty bite out of the profits generated from the sale of their investment assets – that’s why many of them kick the tax can down the road by completing 1031 exchanges and deferring this tax liability.

Investors who don’t want to exchange properties or simply want to divest certain assets from their portfolios will have to pay capital gains taxes on any amount that’s higher than the original cost of the asset. But how much you’ll have to pay depends on a few important factors. 

In this article we’ll take a closer look at capital gains taxes and the primary factors that influence your total tax liability when you sell an investment asset for a higher amount than you paid for it.

Short-term and Long-term Capital Gains Taxes

Capital gains are taxed at different rates depending on three important factors: how long you held the asset, your income level, and your filing status. Let’s discuss holding periods first.

Short-term Capital Gains

Assets held for under one year before divestiture are considered short-term capital gains. The Internal Revenue Service views these profits as ordinary income, so they are taxed at the same rate as any standard income and your tax filing status. 

Here at the short-term capital gains tax rates for 2021:¹


Single filers

Married filing jointly

Head of household


Up to $9,950

Up to $19,900

Up to $19,900


$9,951 to $40,525

$19,901 to $81,050

$14,201 to $54,200


$40,526 to $86,375

$81,051 to $172,750

$54,201 to $86,350


$86,376 to $164,925

$172,751 to $329,850

$86,351 to $164,900


$164,926 to $209,425

$329,851 to $418,850

$164,901 to $209,400


$209,426 to $523,600

$418,851 to $628,300

$209,401 to $523,600


$523,601 and up

$628,301 and up

$523,601 and up


Long-term Capital Gains

Long-term capital gains are taxed much differently. If you held the asset for longer than one year, the capital gains tax rate is determined by your income level and filing status.

Here are the long-term capital gains tax rates 2021 by filing status and income level:


Single Filers

Married Filing Jointly 

Head of Household



Up to $40,400

Up to $80,800

Up to $54,100



$40,401 – $445,850

$80,801 – $501,600

$54,101 – $473,750



Over $445,850

Over $501,600

Over $473,750


As you can see, solo investors filing their own returns would owe nothing in capital gains taxes after selling an investment asset if their regular income for the 2021 tax year was under $40,399. For married investors, that number is $80,799.

The Bottom Line

It’s possible to sell an investment asset and pay nothing in capital gains taxes provided you meet certain income thresholds. Holding an investment for longer than a year also can provide important tax benefits since short-term capital gains tax rates can be significantly higher than long-term rates.

Consult with qualified tax professionals and financial advisers to discuss strategies you can use to defer capital gains taxes or deductions you can take that may lower your annual income and potentially reduce your exposure to capital gains tax liabilities.


1.  A Guide to the Capital Gains Tax Rate, Intuit TurboTax,

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. All investments have an inherent level of risk. The value of your investment will fluctuate with the value of the underlying investments. You could receive back less than you initially invested and there is no guarantee that you will receive any income.

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