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When you sell investments at a profit, you can typically expect to owe capital gains tax. . Historically, the IRS allowed capital gains tax exemptions for seniors aged 55 and older who profited from the sale of a home. That rule was eliminated in 1997 in favor of a broader exemption that benefits all homeowners. As of 2025, only retirement accounts allow for tax breaks related to age. Consider working with a financial advisor to develop a tax strategy for your financial plan.
How Capital Gains Taxes Work
Capital gains are the profits that you make by selling an investment asset. When you buy an investment asset, the original price that you pay for it is known as the asset’s cost basis. When you sell that asset, you compare its sale price to its cost basis. If you make money, this is known as a “capital gain.” If you lose money, this is known as a “capital loss.”
When you sell assets held for less than one year, the short-term capital gains tax rate applies. This rate is equivalent to your ordinary income tax rate. Assets held longer than one year are subject to the more favorable long-term capital gains tax rate.
For the 2025 tax year, capital gains on assets that are held over one year are taxed at the following brackets:
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | $0 – $48,350 | $0 – $96,700 | $0 – $48,350 | $0 – $64,750 |
| 15% | $48,350 – $533,400 | $96,700 – $600,050 | $48,350 – $300,000 | $64,750 – $566,700 |
| 20% | $533,400+ | $600,050+ | $300,000+ | $566,700+ |
For tax year 2024, capital gains on assets that are held over one year are taxed at the following brackets:
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 0% | $0 – $47,025 | $0 – $94,050 | $0 – $47,025 | $0 – $63,000 |
| 15% | $47,026 – $518,900 | $94,051 – $583,750 | $47,026 – $291,850 | $63,001 – $551,350 |
| 20% | $518,900+ | $583,750+ | $291,850+ | $551,350+ |
If you sell an asset after holding it for less than a year, your capital gains will be taxed as ordinary income. For reference, the table below breaks down the income tax rates for tax year 2025:
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 | $0 – $11,925 | $0 – $17,000 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 | $11,925 – $48,475 | $17,000 – $64,850 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 | $48,475 – $103,350 | $64,850 – $103,350 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 | $103,350 – $197,300 | $103,350 – $197,300 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 | $197,300 – $250,525 | $197,300 – $250,500 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 | $250,525 – $375,800 | $250,500 – $626,350 |
| 37% | $626,350+ | $751,600+ | $375,800+ | $626,350+ |
And here’s a look at the income tax rates for tax year 2024:
| Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0 – $11,600 | $0 – $23,200 | $0 – $11,600 | $0 – $16,550 |
| 12% | $11,601 – $47,150 | $23,201 – $94,300 | $11,601 – $47,150 | $16,551 – $63,100 |
| 22% | $47,151 – $100,525 | $94,301 – $201,050 | $47,151 – $100,525 | $63,101 – $100,500 |
| 24% | $100,526 – $191,950 | $201,051 – $383,900 | $100,526 – $191,950 | $100,501 – $191,950 |
| 32% | $191,951 – $243,725 | $383,901 – $487,450 | $191,951 – $243,725 | $191,951 – $243,700 |
| 35% | $243,726 – $609,350 | $487,451 – $731,200 | $243,726 – $365,600 | $243,701 – $609,350 |
| 37% | $609,350+ | $731,200+ | $365,600+ | $609,350+ |
Remember, the capital gains tax rate applies only to the income that’s realized when you sell an asset. If you have a mix of earned income and capital gains, you must calculate each set of income based on its relevant tax bracket. If you have both capital gains and capital losses in a single tax year, you may deduct your losses from your gains when you calculate your taxes.
Capital Gains Taxes and Seniors
Capital gains tax breaks specifically for seniors no longer exist. Senior homeowners can, however, exempt some of the proceeds from the sale of a home from capital gains tax.
For the 2025 tax year, individual taxpayers may exempt $250,000 in capital gains, which doubles to $500,000 for married couples. The exemption limit is unchanged by the One Big Beautiful Bill Act (OBBBA).
Seniors can benefit from capital gains tax exemptions because many rely on Social Security and retirement account withdrawals for income, and selling a home can create a large one-time gain. Without an exemption, that gain can trigger higher taxes, reduce eligibility for certain credits, or even make a portion of Social Security benefits taxable. An exemption allows seniors to keep more of the proceeds from a home sale, easing the tax impact during retirement.
Retirement Accounts
The IRS encourages saving for retirement by using what is known as tax-advantaged accounts; the agency allows different tax deductions for qualifying retirement accounts.
Most retirement accounts offer a tax advantage up front, meaning that the IRS allows you to deduct money that you invest in these accounts from your income taxes during the year in which you make that investment. To put it another way, you pay no taxes on the money you invest in these accounts. The most common forms of front-end retirement accounts are 401(k)s and IRAs.
A small number of retirement accounts offer tax-free growth on your contributions, which are made with after-tax dollars. When you withdraw money from the account later in life, you pay no additional taxes. The most common forms of back-end retirement accounts are Roth IRAs.
Net Unrealized Appreciation
Most 401(k) withdrawals are subject to ordinary income taxes, except in the case of net unrealized appreciation (NUA). That’s the difference in value between the average cost basis of company shares you own and the actual current market value of those shares.
Normally, when you take a distribution from a 401(k) plan that includes shares of company stock, you have a few options: rolling the entire distribution over to an IRA; rolling it over to a new 401(k) plan if you’re changing employers; or moving the company stock to a taxable brokerage account and rolling the remaining account balance over to an IRA or new 401(k).
NUA can be used if you choose the third option. If you’re transferring shares of company stock to a taxable account, then NUA lets you pay ordinary income tax only on the cost basis of the stock. If you decide to sell the stock at some point, you’d benefit from paying the lower long-term capital gains tax rate, which maxes out at 20%.
Rolling shares of company stock into a new 401(k) or IRA wouldn’t allow you to get the full benefit of NUA. Instead, you’d pay ordinary income tax rates on any distributions you take, which currently have an upper limit of 37%. While separating shares of company stock from the rest of your retirement account investments adds a step to the distribution process, it can be well worth it when it’s time to pay the IRS.
History of Capital Gains Exemptions for Seniors
In the late 20th century, the IRS allowed people over the age of 55 to take a special exemption on capital gains taxes when they sold a home. This let homeowners exempt up to $125,000 worth of profit from the sale of their primary residence from their capital gains taxes. The purpose was to help households either in or prepare for retirement.
In 1997, Congress amended the tax code to create the standard exclusion that applies today. Under current law, individuals don’t pay capital gains taxes on the first $250,000 in profit from the sale of their primary residence, while married couples who file their taxes jointly don’t pay taxes on the first $500,000 in gains. In adding this blanket exemption, the exemption that was specifically for households 55 and older was repealed.
Possible Capital Gains Changes Under President Trump
President Trump has discussed making several changes to capital gains taxes. One proposal is to lower the top long-term capital gains rate from 20% to 15%. This could be important for retirees who sell investments held for more than a year, such as stocks, bonds, or real estate (other than their primary home). A lower rate would mean keeping more of the profit instead of paying it in taxes.
Another proposal would allow the cost basis of an asset to be adjusted for inflation before calculating the taxable gain. This is known as “indexing for inflation.” Over many years, inflation can make the dollar amount of your profit look bigger than it really is in today’s money. By adjusting for inflation, the taxable gain would be smaller, which could reduce the taxes owed. This change could especially help seniors who have held investments or property for decades.
Trump has also suggested removing all capital gains taxes on the sale of a primary residence. Eliminating the cap would mean that all profits from selling a main home would be tax-free, no matter how large. This could benefit homeowners in areas where property values have grown significantly over time.
At this time, these ideas are only proposals. They are not part of current tax law and would require approval from Congress before they could take effect. Until then, the existing capital gains rules still apply, so seniors should continue planning based on current law while watching for updates.
Bottom Line
The IRS allows no specific tax exemptions for senior citizens, either when it comes to income or capital gains. The closest you can come is contributing to a Roth IRA or Roth 401(k) with after-tax dollars, allowing you to make qualified withdrawals on a tax-free basis. However, there are several strategies you can employ to minimize your capital gains taxes.
Tips on Tax Exemptions
- Taxes can be complicated, but a financial advisor can help optimize your finances for taxes. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Use SmartAsset’s income tax calculator to get a quick estimate of how much you will owe the federal government during this year’s tax season.
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