Capital gains tax rates vary depending on how long you hold an investment. Short-term rates apply to assets held for one year or less, subject to ordinary income tax rates. Long-term rates apply to investments held for over a year, typically taxed at a lower rate. Individuals in lower income brackets may owe no capital gains tax. In contrast, those in higher brackets face rates up to 20%. Investors can strategize by timing when to sell holdings to optimize tax efficiency. Understanding these rates and implications is crucial for making informed investment decisions and minimizing tax burdens.