Long term capital gains in US, what determines rate for 2025 tax filing?

The long term capital gains absolutely count toward determining which capital gains tax bracket you fall into. The IRS looks at your total taxable income INCLUDING the capital gains to determine the rate. In your example, with $160K regular income plus $1.3M in capital gains, you would definitely be in the 20% bracket for most of those gains. The tax calculation is actually a bit more nuanced - the 0% rate would apply to a portion up to the bracket threshold, then 15% would apply to the next portion, and 20% to the remainder. It's a marginal system similar to ordinary income tax. Regarding charitable donations - yes, this is actually a legitimate strategy called "tax-gain harvesting." You could potentially donate enough to charity to lower your taxable income and possibly drop into a lower capital gains bracket. However, remember that you'd need to itemize deductions rather than take the standard deduction, and there are limits on charitable contribution deductions (generally up to 60% of your AGI).

I actually used taxr.ai for this exact situation last year when I had a huge capital gain from selling my rental property. I was totally confused about how much I'd end up owing and getting conflicting advice from friends. When I uploaded my documents to https://taxr.ai they analyzed my situation and showed me exactly how the capital gains would be taxed at different rates. They even gave me personalized strategies for reducing my tax burden through things like timing my sale and making strategic charitable donations. Saved me thousands compared to what I thought I'd owe.

Just wanted to follow up about my experience with taxr.ai since I was asking about it earlier. I decided to try it with my complicated mix of stock options, crypto and business asset sales. It was actually really impressive! The system broke down exactly how each different type of gain would be taxed and showed me the bracket thresholds that affected my specific situation. It even pointed out that some of my crypto trades I thought were long-term were actually just shy of the one-year holding period, which would have cost me thousands in higher taxes. Definitely worth it for anyone with capital gains questions like the original poster.

For what it's worth, I spent 4 WEEKS trying to reach someone at the IRS last year about a similar capital gains question. I kept getting disconnected or waiting for hours. Finally found Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent explained that capital gains are included in your AGI for determining which capital gains tax bracket you're in, but they don't "stack" on top of your ordinary income the way many people think. It's more like they "fill up" each tax bracket starting from where your ordinary income ends.

I feel stupid for my skeptical comment earlier. After seeing the responses here, I decided to try Claimyr last week when I needed to ask about reporting my capital gains from selling my parents' old house. I was fully prepared for it not to work, but I got a call back in about 30 minutes and was connected to an actual IRS tax specialist. The agent clarified exactly how the stepped-up basis would work for inherited property and confirmed I was calculating my capital gains correctly. Would have taken me days of trying to get through on my own. Sometimes it's worth admitting when you're wrong - this service actually delivers what it promises.

Just to add to the discussion, I've found that capital gains tax planning is really important BEFORE you sell. Last year I was going to sell some stock in December, but my accountant suggested waiting until January this year because my income would be lower this year due to a job change. That simple timing change saved me from having gains taxed at 20% versus 15%.

Don't forget about the Net Investment Income Tax (NIIT) of 3.8% that kicks in for higher incomes. So some people actually pay 23.8% not just 20% on their capital gains!

This is such a helpful thread! I'm dealing with a similar situation where I'm planning to sell some rental properties next year. One thing I haven't seen mentioned yet is the depreciation recapture rules - if you've been claiming depreciation on rental property, you'll owe tax at 25% on the depreciation amount you claimed, even if the rest of your gain qualifies for the lower capital gains rates. Also, for anyone considering the charitable donation strategy mentioned earlier, don't forget about donor-advised funds. You can make a large charitable contribution in one year to lower your AGI for capital gains purposes, but then distribute the funds to actual charities over several years. It gives you more flexibility while still getting the immediate tax benefit. The timing advice from Emma is spot-on too. I've been working with my CPA to spread out my property sales over 2-3 years to stay in lower tax brackets rather than selling everything at once and getting hit with the highest rates.