Long-term capital gains are subject to lower rates of tax than short-term capital gains, which are taxed at ordinary income tax rates. You therefore need to know your holding period for any capital asset you sell. If you hold an asset for more than one year, the gain you realize when you sell it will be long-term capital gain and taxed at the reduced rates. For this reason, you should generally try to hold capital assets for at least one year to get lower rates.
If you sell some but not all your stock in a company, the rules for determining your holding period will depend on your method of accounting for the securities (e.g., FIFO, LIFO, etc., as noted above in relation to determining your basis). You also may get to count the holding period of the person from whom you acquired your stock if you acquired it other than by purchase or other taxable transaction (e.g., if you inherited it).
If you have long-term gains, the next thing you need to know is which capital gains tax bracket you fall into – the 0%, 15%, or 20% bracket. Just like with your wages and other ordinary income, the rate at which you’re taxed on long-term capital gains depends on whether your taxable income is above or below certain thresholds for the year. Unlike tax rate brackets for ordinary income, once your total income is above the relevant threshold, all your capital gains are taxed at the higher rate (so there may be situations where you may come out ahead by earning less total income for the year).
For 2022, the 0% rate applies to people with taxable incomes up to $83,350 for joint filers, $55,800 for head-of-household filers, and $41,675 for single filers and married couples filing separate returns. The 15% rate applies to people with taxable incomes above these limits and up to $517,200 for joint filers, $488,500 for head-of-household filers, $459,750 for single filers, and $258,600 for married couples filing separate returns. If your taxable income is above the 15% bracket, you will pay tax on your capital gains at 20%.