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Long-term capital gains tax is the amount of money assessed on gains you reap when you sell an asset you have held for more than a year.

In the U.S., the federal and state governments tax different kinds of income in different ways. The money you make at work, for instance, is taxed at income tax rates. The money you make from investing is taxed at capital gains rates. How much capital gains you pay depends on how long you’ve held the investment, your income, and your filing status. With long-term capital gains tax, you’ll pay a 0%, 15%, or 20% tax.

What Is Capital Gains Tax?

Whether you’re filing taxes for the first time or have been doing so for years, capital gains tax might still be new to you. Here’s a quick primer.

•   Capital gains tax is a type of tax designed primarily as a way for governments to generate revenue by taxing the money you make when you invest.

•   These fees are taxes on investment income, which helps create a comprehensive tax system in which wealth generated through investing is taxed in addition to wealth generated by labor.

Capital gains tax may also be seen as a mechanism that promotes wealth equality because wealthy individuals often accrue more investment returns.

Recommended: What Is Income Tax Withholding and How Does It Work?

What’s Considered a Capital Gain?

A capital gain occurs when you buy an investment and sell it for more than you paid for it. The gain is the difference between the purchase price and the sale price. For example, if you buy a stock for $30 and sell it for $50, you’ve generated a capital gain of $20. You’ll only owe taxes on this gain.

You can also have a capital loss. Say you buy another stock for $30 and sell it for $15. In this case, you’ve generated a loss of $15, which is not subject to tax at all. In fact, you can use capital losses to offset your gains. Offset your $20 gain from the example above with your $15 loss, and you’ll have a net gain of $5. You may only owe taxes on that amount.

There are several common assets that may be subject to capital gains taxes including:

•   Stocks, bonds, and index funds

•   Commodities

•   Real estate investments (though you may qualify for certain exemptions on the sale of your primary residence.)

•   Business interests

•   Collectibles

Short-Term vs. Long-Term Capital Gains

There are two types of capital gains: short-term and long-term gains. You owe short-term capital gains tax on investments you’ve held for one year or less and sold for a profit. Short-term capital gains are taxed at the same rates as your ordinary income based on your tax bracket.

Depending on how much money you make (say, considerably more than the average salary in the U.S.), these rates can be relatively high.

You owe long-term capital gains tax on the profit you’ve made from the sale of investments you’ve owned for a year or more. The government taxes these at a preferential rate to encourage long-term investing.

Recommended: Credit Score Monitoring

What Is the Long-Term Capital Gains Tax Rate?

The long-term capital gains tax rate is 0%, 15%, or 20%, and it depends on your income and your filing status. The following rates are for long-term capital gains made in 2025.

Worth noting: The long-term capital gains tax 2026 shares the same rates, but the qualifying incomes in the brackets are slightly higher to reflect the impact of inflation.

How Capital Gains Taxes Work

To better understand how tax on long-term capital gains works, here’s an example:

•   Say you bought $5,000 worth of shares in a mutual fund.

•   You sell them 10 years later for $10,000, which means you have a $5,000 taxable gain.

•   If you make $70,000 per year and file a single tax return, your long-term capital gains tax rate will be 15%.

•   That means you’ll owe 0.15 x $5,000, or $750 in long-term capital gains tax on the amount your fund rose in value during the time you held it.

By knowing the amount you’ll need to pay, you can better prepare for and track your budget and outflow of funds at tax time.

Recommended: How Much Do You Have to Make to File Taxes?

Capital Gains Tax Strategies

There are several ways you can reduce capital gains taxes or otherwise use them to your advantage.

•   Hold your investments as long as you can: Hang on to investments for more than a year whenever possible to qualify for preferential long-term rates.

•   Use tax-advantaged accounts: When you can, invest inside of tax-advantaged accounts, such as 401(k)s and traditional and Roth IRAs. Money inside these accounts grows tax-deferred or tax-free. That means you don’t have to pay any capital gains when you sell investments in the account.

With 401(k)s and traditional IRAs, you’ll pay income tax on the withdrawals you make in retirement. But with Roth accounts, your withdrawals are tax-free.

“Traditional IRAs can help you lower your tax bill and are great for individuals who earn too much money to contribute directly to a Roth IRA,” says Brian Walsh, CFP^® and Head of Advice & Planning at SoFi. “Higher-income earners might not get to deduct contributions from their taxes now, but they can take advantage of tax-deferred growth between now and retirement.”

•   Take advantage of the home exclusion: If you’re selling your primary residence at a profit, you may qualify to exclude up to $250,000 in capital gains if you’re a single filer, and $500,000 if you’re married and filing jointly. In general, to be eligible for this exclusion, you must have owned and used your home as your primary residence for a period that totals at least two years out of the five years prior to that date on which you sell the home.

•   Consider tax-loss harvesting: You’ve already learned that you can use capital losses to offset capital gains. Doing so strategically is known as tax-loss harvesting, and it may be a strategy worth considering as you prepare for tax season.

For example, you may sell certain investments at a loss when you know you are going to incur a large capital gains tax bill. Also, if your capital losses are greater than your gain, you may be able to offset up to $3,000 worth of income. If you’re unable to use your losses in a given year, you can roll them over to the next.

Strategies like tax-loss harvesting can be complicated, and it may be worth speaking with a tax professional to avoid making any tax filing mistakes.

Do You Pay State Taxes on Capital Gains?

In addition to federal capital gains tax, you may owe state tax as well. Not all states charge capital gains, but many (currently more than 40) do. Visit your state government website to find out if yours is one of those that does and what the current rates are.

The Takeaway

When you sell an investment you’ve held for more than a year, you may owe long-term capital gains tax. The rate you pay can vary with filing status and income, ranging from 0% to 15% to 20%. With a deeper understanding of how these taxes work, you can appropriately pay these taxes and possibly offset some of the amount. This can help you manage your money more effectively.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

How much tax do I pay on long-term capital gains?

Depending on your income and filing status, you’ll pay 0%, 15%, or 20% in federal long-term capital gains taxes. You may also owe state capital gains taxes, depending on where you live.

What qualifies as long-term capital gains?

Long-term gains are money you have made from the sale of assets you’ve owned for longer than a year. It may apply to investments, real estate, and collectibles, among other assets.

How do I avoid paying capital gains tax?

You don’t have to pay capital gains taxes on the sale of investments inside of tax-advantaged accounts, such as 401(k)s and IRAs. You may also avoid paying capital gains tax if you offset your gains with capital losses.

What is a long-term capital gain example?

An example of a long-term capital gain might be the sale of a rental property that an investor has owned for 10 years. Say that investor bought the property for $200,000 and sold it for $325,000. That investment would have a capital gain of $125,000. Because the asset was held for more than a year, it qualifies as a long-term gain.

photo credit: iStock/LordHenriVoton
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SORL-Q425-068

Self-employment tax consists of Social Security and Medicare tax, which are the same taxes that would be withheld from your pay if you worked for an employer. If you work for yourself, you’ll need to ensure you’re handling your tax filing correctly. That means paying self-employment tax, typically in four estimated quarterly installments along with any federal, state, and local income tax owed.

Here’s what you should know about self-employment tax if you’re contemplating being your own boss or are already up and running as a freelancer.

What Is Self-Employment Tax?

Self-employment tax is the income tax you pay on net earnings, as mandated by the Self-Employment Contributions Act (SECA). The IRS determines who must pay self-employment tax.

SECA taxes help to fund Social Security and Medicare benefit programs for people who are elderly, retired, or disabled, as well as their eligible dependents. That’s the same as Federal Insurance Contributions Act (FICA) taxes, which are part of your income tax withholding if you work for an employer.

Self-employment tax exists to ensure that people who work for themselves pay their share of federal income tax. It’s important to understand how much you’re making and what tax bracket you’re in, and to report your self-employment income accurately, because what you earn influences what you’ll be able to collect from Social Security when you retire.

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How Much Is Self-Employment Tax?

The Internal Revenue Service sets the self-employment tax rate at 15.3%. There are two parts to the tax:

•   12.4% for Social Security, which is also referred to as Old-Age, Survivors, and Disability Insurance (OASDI)

•   2.9% for Medicare

The amount you pay in self-employment tax depends on how much you earn from self-employment for the year and what you deduct. It doesn’t matter what profession you are pursuing, whether you’re an actor or a nature photographer (which can be a good job for introverts).

What is the amount of the self-employment tax (SECA), and how does it compare to FICA taxes? The tax rates are the same. What’s different is how they’re paid.

•   If you’re self-employed, you’re responsible for calculating and paying all SECA taxes.

•   If you work for someone else, your employer determines how much to withhold from your checks each pay period.

Employers cover half of the tax for their employees. So, instead of paying 15.3% yourself, you’d pay 6.2% for OASDI (Social Security) taxes and 1.45% for Medicare tax, while your employer pays the rest. However, you as a self-employed individual may deduct the other half of this payment (the portion an employer would pay) on your tax return when calculating your adjusted gross income.

Recommended: How Much Do You Have to Make to File Taxes?

Who Has to Pay Self-Employment Tax?

The IRS requires you to pay self-employment tax if either of the following is true:

•   Your net earnings from self-employment are $400 or more

•   You had church employee income of $108.28 or more

Those rules apply to sole proprietors, independent contractors, partners, and single-member limited liability corporations (LLCs).

Net earnings are the part of your gross income you keep after subtracting “ordinary and necessary” trade or business expenses. If you’re self-employed as a sole proprietor or independent contractor, you use Schedule C to calculate your net earnings from self-employment. Self-employment tax is reported on Schedule SE of your Form 1040.

There’s no age exemption for self-employment tax. If you owe it, you’ll need to pay it even if you already receive Social Security benefits.

Self-Employment Tax Rate for 2025 and 2026

If you’re preparing for tax season, it helps to know if there are any updates to tax rates. The self-employment tax rate for the 2025 tax year is 15.3%; it’s the same for 2026. So for returns you file in 2026 and 2027, you’ll calculate self-employment tax as 15.3% of net earnings.

What’s different for each tax year is the amount of your net earnings that are subject to Social Security tax. This is called the wage base limit.

•   For 2025, the wage base limit for the Social Security portion of self-employment tax is $176,100.

•   For 2026, the wage base limit increases to $184,500.

How much is self-employment tax, in terms of your total income? According to the IRS, the amount of net earnings subject to self-employment tax is 92.35%. All your net earnings are subject to the Medicare tax.

Certain self-employed individuals are subject to an additional Medicare tax of 0.9%. This tax applies if your income is above a certain threshold for your filing status. Here are the current thresholds for both 2025 and 2026:

Recommended: What Are the Different Types of Taxes?

How to Calculate Self-Employment Tax

A self-employment tax calculator (options are available online) can help you estimate what you’ll owe, and using an online budget planner can help you monitor your money year-round.

That said, you don’t always have to rely on tech. It’s possible to do the calculations yourself. Here’s how to calculate self-employment tax in a few simple steps.

1.    Calculate your net earnings from self-employment, which again is the difference between your gross income and deductible expenses.

2.    Multiply your net earnings by 92.35%.

3.    If the amount is less than $176,100 (in 2025) or $184,500 (in 2026), multiply it by 12.4% to calculate your Social Security tax. Otherwise, multiply $176,100 (in 2025) or $184,500 (in 2026) by 12.4%.

4.    Multiply the amount you got in step two by 2.9% to calculate your Medicare tax.

You should now have two amounts. The final step is to add them together.

Example Self-Employment Tax Calculation

If you’re new to self-employment tax (and possibly paying taxes for the first time as well), it can help to have an example to follow of how to calculate what you owe.

Say you start an e-commerce store. You bring in $110,000 in gross income and have $10,000 in home office expenses, leaving you with $100,000 in net earnings. Now you can do the math.

•   $100,000 x 92.35% = $92,350

•   $92,350 x 12.4% = $11,451.40

•   $100,000 x 2.9% = $2,678.15

•   $11,451.40 + $2,678.15 = $14,129.55 in self-employment tax

You can deduct one-half of what you pay in self-employment tax. Deductions reduce your taxable income for the year, which can help you to owe less or get a bigger refund.

How to Pay Self-Employment Tax

Self-employment tax is typically paid in four installments, called quarterly estimated payments. These payments reflect the amount you estimate you’ll owe in taxes based on your expected net earnings.

Quarterly payments are typically due:

•   April 15 for income earned from January 1 to March 31

•   June 15 for income earned from April 1 to May 31

•   September 15 for income earned from June 1 to August 31

•   January 15 of the following year for income earned from September 1 to December 31

Making quarterly payments doesn’t mean you don’t have to file a federal income tax return. You don’t want to miss your tax filing deadlines for those quarterly payments, but you’ll still need to hit the annual tax filing deadline, which is usually April 15.

If you’ve underpaid your estimated taxes, you may owe when you file. The IRS could also impose an underpayment penalty if you owe more than $1,000. Underpayments and missed payments are two of the biggest tax filing mistakes to avoid when you’re self-employed.

Tax Deductions for Self-Employment

Claiming tax deductions can shrink your taxable income. Some deductions are designed for people who are self-employed or run businesses, while other deductions are available to anyone who qualifies.

Examples of self-employed deductions include:

•   Half of the self-employment tax you paid, as noted above

•   Contributions to a self-employed retirement plan, such as a solo 401(k) or SEP IRA

•   Contributions to a traditional IRA

•   Health Savings Account (HSA) contributions (if you have a high deductible health plan)

•   Health insurance premiums

•   Home office expenses (an online money tracker can help you keep tabs on these)

•   Mileage and travel expenses, if that applies to the type of business you run

You may also be able to claim other deductions as well, based on how you file. For example, a sole proprietor can write off mortgage interest, student loan interest, and charitable contributions alongside business expenses.

Worth noting: If you’re filing taxes on investment income, you can also deduct expenses related to maintaining the property.

“It’s a good idea to check your pay stubs periodically to ensure that the deductions being taken out are accurate and align with your financial goals,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “To make sure the appropriate amount of taxes are being withheld from each paycheck, you may also want to revisit your W-4 annually and make any adjustments as your circumstances change.”

The Takeaway

Self-employment tax refers to the Social Security and Medicare taxes that earners who are not employees must pay. Typically, employers pay half this amount, but the self-employed must pay the full 15.3% amount and can then deduct half when doing their taxes. Understanding how and when self-employment taxes are due can play an important role in tracking and managing your money well.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Why do I have to pay self-employment tax?

You have to pay self-employment tax because that is the law. Paying self-employment tax isn’t that different from the tax withholding your employer would take from your check if you had a regular 9 to 5 job.

What is 30% tax for self-employed?

The 30% rule of thumb for self-employed taxpayers suggests holding back 30% of your gross income to cover your tax obligations. The idea is that by setting aside this much, you should be able to comfortably cover your self-employment tax obligations.

What is the 20% self-employment deduction?

Some self-employed individuals may be able to take advantage of the Qualified Business Income (QBI) deduction. This deduction allows you to write off up to 20% of your QBI, plus 20% of any qualified real estate investment trust (REIT) dividends you receive. This deduction is only available, however, to businesses in certain trades and industries.

How do I get the biggest tax refund when self-employed?

Getting a tax refund means that you’ve paid in more tax than you owe. The simplest way to increase your refund size is to maximize your deductions. Maxing out a tax-advantaged retirement plan, itemizing every eligible business expense, and deducting other expenses, like charitable contributions or mortgage interest, could help you snag a bigger refund.

How much can an LLC write off?

Technically, there’s no limit on the dollar amount an LLC, or limited liability company, can write off. However, each expense you deduct must be legitimate and reflect the amount you actually spent. It’s wise to keep a paper or digital trail to document your deductible business expenses, just in case the IRS comes knocking with an audit.

What happens if my LLC makes no money?

If your only source of income is an LLC and you make no money, then you wouldn’t owe any taxes since there are no net earnings to report. You would, however, still need to file your return and document any net operating losses. A net operating loss happens when your business spends more than it brings in.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

SORL-Q425-064

The Internal Revenue Service (IRS) uses seven different tax brackets to determine how much you owe when married filing jointly or any other status. In the U.S., taxpayers are subject to a progressive tax system which means that as your income increases, so does your tax rate. Tax brackets determine which tax rate is assigned to each layer of income you have.

The IRS takes your filing status into account when establishing tax brackets, which is important for couples to know. What are the 2025 tax brackets for married filing jointly? Here’s what you need to know.

2025 Tax Brackets

If you’re wondering what tax bracket you’re in, that’s a good question to ask, especially if you’re filing taxes for the first time or your filing status has changed because you’ve gotten married.

Married filing jointly 2025 tax brackets correspond to seven federal income tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Income ranges used for 2025 tax brackets apply to returns filed in 2026.

What are the tax brackets for 2025 married filing jointly? The table below breaks it down.

2025 Tax Brackets

To find out what tax bracket you are in, check the following table. It illustrates 2025 federal tax brackets and tax rates, based on your filing status.

Recommended: How Much Do You Have to Make to File Taxes?

2026 Tax Brackets

While tax rates are the same for 2025 and 2026, the income ranges for each tax bracket are higher. Here’s a look at how 2026 tax brackets compare to 2025 tax brackets for married jointly filing and all other filing statuses. This information can be helpful as you track your finances.

How Federal Tax Brackets and Tax Rates Work

In the U.S., the tax code operates on a progressive system that takes into account your income and filing status to determine how much tax you’ll owe. In a progressive system, the highest-income earners are subject to the highest tax rates. This is based on a concept called ability to pay, which reasons that if you earn more, you can afford to pay more in taxes.

Federal tax brackets assign a tax rate to individual income ranges. There are seven tax rates and seven corresponding income ranges. Tax rates, which run from 10% to 37%, are the same for the 2025 and 2026 tax years and apply to these individual income tax filing statuses:

•   Single

•   Married filing jointly

•   Married filing separately

•   Head of household

•   Qualifying widow(er)

Tax rates may be the same from year to year, but income ranges can change. For instance, the tax brackets for 2024 married jointly filing are different from the tax brackets for 2025 married jointly.

If you look at the income ranges, you’ll see that they’re largely the same for most filing statuses. The exception is married couples filing jointly. Couples have higher income ranges since it’s assumed that both parties earn income.

Curious about what are the tax brackets for 2025 married filing jointly at the state level? It depends on where you live and file state income taxes.

Forty-one states and the District of Columbia assess an income tax. Fourteen states use a flat tax rate that applies to all income levels, while the remaining 27 and the District of Columbia use graduated tax rates assigned to different tax brackets.

Keep in mind that there are different types of taxes. Tax brackets and tax rates for individuals are not the same as tax rates for corporations.

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What Is a Marginal Tax Rate?

A marginal tax rate is the tax rate you pay on the highest dollar of taxable income you have. Your marginal tax rate doesn’t apply to all your income; just to the last dollar earned.

For example, say that you take a new job with a higher salary and move from the 22% to the 24% marginal tax rate. That doesn’t mean that your entire salary is now taxed at the 24% rate. Only the amount that goes over the income threshold into the 24% bracket would be assessed at that rate.

Marginal tax rates apply to all your taxable income for the year. Taxable income is any income you receive that isn’t legally exempt from tax, including:

•   Wages (pay that’s typically based on the hours worked)

•   Salaries (pay that’s typically a fixed amount that’s paid regularly)

•   Tips

•   Business income

•   Royalties

•   Fringe benefits

•   Self-employment earnings

•   Side hustle or gig work earnings

•   Interest on savings accounts

•   Profits from the sale of virtual currencies

You’ll also pay taxes on investment property if you own a rental unit. It’s important to accurately report to the IRS all income you and your spouse have for the year to avoid issues.

Underreporting and misrepresenting income are some of the biggest tax filing mistakes people make.

What Is an Effective Tax Rate?

Your effective tax rate is your average tax rate based on how your income is taxed in different brackets. It’s common for your effective tax rate to be lower than your marginal tax rate.

If you and your spouse file jointly with $250,000 in income (meaning you each earn more than the average salary in the U.S.), your marginal tax rate would be 24%. But your effective tax rate would be 17.5%. That assumes that you claim the standard deduction.

Standard deductions are amounts you can subtract from your taxable income. The standard deduction amount for married filing jointly in 2025 is $31,500.

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How to Reduce Taxes Owed

Reducing your tax liability as a couple starts with understanding what kind of tax breaks you might qualify for. It can also involve some strategizing regarding your income.

•   Claim credits. Tax credits reduce your taxes owed on a dollar-for-dollar basis. So if you owe $500 in taxes you could use a $500 tax credit to reduce that to $0. Some of the most common tax credits for couples include the Child Tax Credit (CTC), the Child and Dependent Care Credit, and the Retirement Savers’ Credit.

•   Consider itemizing. Couples can claim the standard deduction, but you might itemize if you have significant deductible expenses. Some of the expenses you might deduct include mortgage interest if you own a home, student loan interest, and charitable contributions.

•   Open a spousal IRA. Individual retirement accounts (IRAs) let you save money for retirement on a tax-advantaged basis. Contributions to traditional IRAs are tax-deductible for most people. If you’re married but only one of you works, you could open a spousal IRA and make deductible contributions to it on behalf of your nonworking spouse.

•   Contribute to other retirement accounts. If you both work, you can still fund traditional IRAs for a tax deduction, or sock money into your 401(k) plans at work. Contributions to a 401(k) can reduce your taxable income for the year, which could help you owe less in taxes.

•   Check your withholding. Your withholding is the amount of money you tell your employer to hold back for taxes. Getting a refund can feel like a nice windfall, but that just means you’ve loaned the government your money for a year interest-free. You can adjust your withholding to pay the right amount of tax instead.

“It’s a good idea to check your pay stubs periodically to ensure that the deductions being taken out are accurate and align with your financial goals,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “To make sure the appropriate amount of taxes are being withheld from each paycheck, you may also want to revisit your W-4 annually and make any adjustments as your circumstances change.”

You may also defer year-end bonuses or other compensation until the beginning of the new year so you have less taxable income to report. As you start preparing for tax season, consider talking to a financial advisor or tax pro about the best strategies to minimize your taxes owed.

The Takeaway

Knowing how tax brackets work (and which one you’re in as a married couple filing jointly) can help you get your tax return completed accurately with fewer headaches. It also helps to keep a record of your deductible expenses throughout the year if you plan to itemize when you file. That’s something a money tracker can help with.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What is the standard deduction for married filing jointly in 2025?

The standard deduction for married couples filing jointly is $31,500 for the 2025 tax year. That amount increases to $32,200 for the 2026 tax year.

What are the federal tax brackets for married couples?

The federal tax brackets for married couples filing joint returns assign seven tax rates ranging from 10% to 37%. For tax year 2025, the lowest tax rate applies to the first $23,850 in income while the highest tax rate applies to income above $751,601.

Will tax refunds be bigger for 2025?

Many taxpayers may qualify for a larger refund on their 2025 return, due to inflation-related adjustments to the tax brackets and standard deduction amounts.

What is the tax offset for 2025?

Tax offsets occur when the federal government holds back part or all of your tax refund to satisfy a delinquent debt. Tax offsets can happen if you owe federal income taxes or federal student loan debts.

How will tax brackets change for 2025?

The 2025 tax brackets are subject to the same tax rates that applied in 2024 and will apply in 2026; the difference is the range of incomes subject to each tax rate. The IRS periodically adjusts tax brackets as well as standard deduction limits to account for inflation.

At what age is social security no longer taxed?

There is no minimum or maximum age at which Social Security benefits cannot be taxed. Whether you must pay tax on Social Security benefits depends on whether you have other taxable income to report for the year.

photo credit: PonyWang
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SORL-Q425-055

If you are new to trading stocks, the sheer volume of stock market terms can be off-putting. But learning some basic stock trading terminology is a great place to begin before investing any money. For any new investor just getting into trading, getting a grasp on some basic stock market terms can be extremely helpful.

The Significance of Knowing Stock Market Terminology

It’s important to have at least a grasp of some basic stock market terms if you plan on trading or investing. If you don’t do a bit of homework beforehand, you may find yourself feeling in over your head, and grasping for help from family members, friends, or a financial professional.

While there are a multitude of different stock market terms out there, it isn’t terribly difficult to develop an understanding of the basics. Yes, it’ll take some time and practice, but like learning anything else, once you get the hang of it, it should become easier as you move along in your investment journey.

Fundamental Terms

To get a fundamental understanding of the stock market, it can be helpful to start with some relatively basic terms, including the following.

Asset Allocation

Asset allocation involves investing across asset classes in a portfolio in order to balance the different potential risks and returns, and there are three main asset classes, which are typically stocks, bonds, and cash. Asset allocation is closely tied with portfolio diversification.

Asset Classes

There are several asset classes, or types of assets, that investors can invest in. This can include, but is not limited to, stocks, bonds, money market accounts, cash, real estate, commodities, and more. You can also think of certain assets as equities, debt securities, and more.

Bid

Bid, in the context of bid-ask spread, refers to the “bid price,” or highest price, that an investor is willing to pay for a security or investment.

Ask

Ask, in the context of bid-ask spread, is the opposite of bid, and is the lowest price that investors are willing to sell a security for.

Bid-Ask Spread

The bid-ask spread is the difference between the bid and ask price, and can be a measure of liquidity. When the bid and ask prices match, a sale takes place, on a first-come basis if there is more than one buyer. The bid-ask spread is the difference between the highest price a buyer is willing to bid, and the lowest price a seller is willing to ask.

Market Phrases

There are a number of market phrases, or types of jargon that may be used in and around the stock market, too. Here are some examples.

Bull Market

A bull market describes market conditions when a market index rises by at least 20% over two months or more, and is often used to describe high levels of confidence and optimism among investors.

Bear Market

A bear market describes a 20% fall in a market index, and is the opposite of a bull market. It can signal overall pessimism among investors.

Market Volatility

Market volatility refers to how much a market index’s value increases or decreases within a specific period of time. Volatility can occur for a number of reasons.

Investment Vehicles

There are many specific investment vehicles that investors should know about, too, including different types of stocks, bonds, and more.

Bonds

Bonds are a type of debt security, which effectively means that investors are loaning money to the issuer. There are many types of bonds, and they’re often considered to be a less-risky investment alternative to, say, stocks.

Common Stock

Common stock, also known as shares or equity, is like owning a piece of a company. You purchase stock in a company, and receive a proportional part of that corporation’s assets and earnings. The price of stock is different for each company and fluctuates over time.

Preferred Stock

Preferred stock is similar to common stock, but usually grants shareholders some sort of preferential treatment, such as advanced dividend payments, and more.

ETFs

ETFs, or “exchange-traded funds,” are types of funds that trade on exchanges like stocks. Investors can purchase shares of ETFs, which incorporate numerous different types of securities (like a “basket” of different investments), and may offer built-in diversification as an advantage for investors.

Mutual Funds

Mutual funds are companies or entities that pool money from numerous different investors and then invest it on their behalf. A manager oversees a mutual fund, and actively manages it. Investors can purchase shares of mutual funds, which are similar to ETFs in many ways.

Stock Analysis Terms

Analyzing the stock market incorporates its own set of terminology, and it can be helpful for investors to know a bit of the vernacular.

Earnings Per Share (EPS)

Earnings per share, often shortened as “EPS,” is a ratio that helps determine a company’s ability to drive profits for shareholders. It’s a common and oft-cited business metric for investors.

Dividends

A dividend is a payment made from a company to its shareholders, often drawn from earnings. Usually, these are made in cash, but sometimes they are paid out as additional stock shares. They are typically paid on an annual or quarterly basis, and typically only come from more established companies, not startups.

Dividend Yield

Dividend yield refers to how much a company pays out to shareholders on an annual basis relative to its share price. It’s a ratio that’s calculated by dividing the company’s dividend by its share price.

The Price-to-earnings (P/E) Ratio

The price-to-earnings ratio (often written as the P/E ratio, PER, or P/E) is a ratio of a company’s current share price relative to the company’s earnings per share. It can be used to compare performances of different companies.

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Price Movements and Pattern Terms

There are also a number of movement and pattern terms that investors may want to familiarize themselves with.

Trading Volume

Trading volume refers to how much trading is happening on an exchange. For a stock trading on a stock exchange, the stock volume is typically reported as the number of shares that changed hands during any given day. It’s important to note that even with an increasing price, if it’s paired with a decreasing volume, that can mean a lack of interest in a stock. A price increase or drop on a larger volume day (i.e., a bigger trading day) is a potential signal that the stock has changed dramatically.

Volume-weighted Average Price (VWAP)

Volume-weighted average price, or VWAP, is a short-term price trend indicator used when analyzing intraday, or same-day, stock charts. It’s a type of technical analysis indicator.

Trading Order Types and Execution

Investors need to know the types of orders that they’re likely to use throughout their investing journey. Those include market orders, limit orders, and stop-loss orders.

Market Order

A market order is the most common type of order, and it means that an investor wants to buy or sell a security as soon as possible at the current market price.

Limit Order

Limit orders are another common type of order, and involve an investor placing an order to buy or sell a security at a specific price or within a specific time frame. There are two types: Buy limit orders, and sell limit orders.

Stop-loss Orders

Stop-loss orders, or sometimes called stop orders, are orders that specify a security to be sold at a certain price.

Day Trading Terms

For the prospective day-trader, there are a slate of terms to know as well.

Day Trading

Day trading involves an investor making short-term trades on a daily or weekly basis in an effort to generate returns off of price fluctuations in the market. There are numerous day trading strategies that investors can utilize.

Pattern Day Trader

A pattern day trader is a designation created by FINRA, and refers to traders who trade securities four or more times within five days. There are rules and stipulations that pattern day traders, and their chosen trading platforms, must follow.

Trading Halt

A trading halt can refer to a specific stock or the entire market, and involves a halt to all trading activity for an indefinite period of time.

Long-term Investment Terms

The opposite of day trading, long-term investing also ropes in its own jargon.

Averaging Down

Averaging down involves a scenario in which an investor already owns some stock but then purchases additional stock after the price has dropped. It results in a decrease in the overall average price for which you purchased the company stock. Investors can profit if the company’s price subsequently recovers.

Diversification

Diversification refers to investing in a wide range of assets and asset classes, as opposed to concentrating investments in a specific area or class.

Dollar-cost Averaging

Dollar-cost averaging is a strategy to manage volatility in a portfolio, and involves regularly investing in the same security at different times, but with the identical amount. Effectively, the cost of those investments will average out over time.

Derivatives and Market Predictors

Getting into the weeds now — derivatives and market predictors are more high-level market elements, but it can be helpful to know some of the terminology.

Futures

Futures, or futures contracts, are a form of derivatives that are a contract between two traders, agreeing to buy or sell an asset at a specific price at a future date.

Options Trading

Options trading involves buying and selling options contracts, of which there are many types.

Arbitrage

Arbitrage refers to price differences in the same asset on different markets. Traders may be able to take advantage of those differences to generate returns.

Financial Health Indicators

We’re not done yet! These terms involve financial health indicators.

Debt-to-equity (D/E)

Debt-to-equity is a financial metric that helps investors determine risks with a specific stock, and is calculated by dividing a company’s equity by its debts.

Liquidity

Market liquidity is essentially how easily shares of stock can be converted to cash. The market for a stock is “liquid” if its shares can be sold quickly, and the act of selling only minimally impacts the stock price.

Profit Margin

Profit margin refers to how much profit is generated from a trade when expenses are considered. Lowering related expenses can increase profit margin, all else being equal.

Economic Terms

Knowing some key economic terms can be helpful when trying to size up larger economic and market trends.

Volatility

Volatility refers to the range of a stock price’s change over time. If the price stays stable, then the stock has low volatility. If the price jumps from high to low and then back to high often, it would be considered more of a high-volatility stock.

Economic Bubbles

Economic bubbles or market bubbles are often created by widespread speculative trading, and involve a runup or buildup of prices for a given asset, which can be detached from its actual value. Eventually, the bubble tends to burst and investors may incur a loss.

Recession

A recession is a period of economic contraction, and is usually accompanied by higher unemployment rates, business failures, and lower gross domestic product figures. Recessions are officially declared by the Business Cycle Dating Committee at the National Bureau of Economic Research.

Adaptation and Risk Management

For particularly savvy investors, knowing some terms relating to adaptation and risk management can also be helpful when navigating the markets.

Sector Rotation

Sector rotation involves investing in different sectors of the economy at different times, and rotating holdings between those sectors in an effort to generate the biggest returns.

Hedging

Hedging is an investment strategy that involves limiting risk exposure within different parts of a portfolio, and there are many methods or strategies for doing so.

The Takeaway

Learning some basic stock market terms can go a long way toward helping an investor navigate the markets, and there are a lot of terms and jargon to get familiar with. But doing a bit of homework early on can be enormously helpful so that you’re not trying to figure things out on the fly as an investor.

While you’re not going to learn everything right off the bat, if you start to spend a lot of time investing and trading, you’re likely to quickly catch on to certain terms, while others will come with time. As always, if you have questions, you can reach out to a financial professional for help, or do a bit more research on your own.

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FAQ

Why should I familiarize myself with stock market terminology?

Learning some basic stock market terms can go a long way toward helping an investor navigate the markets, and better understand what might be happening at any given time.

Is it important to understand stock market jargon when investing?

While non-professional investors or traders don’t necessarily need to know every phrase or piece of jargon used by professionals, it can be helpful to get a sense of what’s being discussed or talked about in the markets.

What are some common stock market terms?

Common stock market terms or phrases include “asset allocation,” “bid-ask spread,” “volatility,” “diversification,” “trading volume,” “pattern day trader,” “hedging,” and “sector rotation,” among many others.