Long-term capital gain
Also: long-term capital gain, LTCG, long term gain
Gain on an asset held more than one year. Taxed at federal rates of 0%, 15%, or 20% depending on income, plus the 3.8% NIIT at higher income levels.
A long-term capital gain is the profit on a capital asset held for more than one year. The 2025 federal rate brackets are 0% up to $48,350 single / $96,700 married, 15% from there to $533,400 single / $600,050 married, and 20% above those thresholds. The 3.8% Net Investment Income Tax applies once modified AGI exceeds $200,000 single / $250,000 married. State tax stacks on top, ranging from 0% in Washington and Texas to 13.3% in California.
Example: a San Francisco engineer sells RSU shares held 14 months for a $300,000 gain. Federal long-term is 20% ($60,000), NIIT is 3.8% ($11,400), California is 13.3% ($39,900). Combined effective rate is 37.1%, producing $111,300 of tax.
Common mistake: assuming long-term rates apply to ISO exercises held for one year. The two-year-from-grant rule is the other half of Section 422 qualifying disposition. A sale at 13 months from exercise but 18 months from grant is still disqualifying, taxed as ordinary wages on the spread.
Long-term capital gain rates matter at diversification timing, QSBS planning, and choice-of-state decisions before a large sale.