Mastering margin collapsing

The top and bottom margins of blocks are sometimes combined (collapsed) into a single margin whose size is the largest of the individual margins (or just one of them, if they are equal), a behavior known as margin collapsing. Note that the margins of floating and absolutely positioned elements never collapse.

Margin collapsing occurs in three basic cases:

Adjacent siblings: The margins of adjacent siblings are collapsed (except when the latter sibling needs to be cleared past floats).
No content separating parent and descendants: If there is no border, padding, inline part, block formatting context created, or clearance to separate the margin-top of a block from the margin-top of one or more of its descendant blocks; or no border, padding, inline content, height, or min-height to separate the margin-bottom of a block from the margin-bottom of one or more of its descendant blocks, then those margins collapse. The collapsed margin ends up outside the parent.
Empty blocks: If there is no border, padding, inline content, height, or min-height to separate a block's margin-top from its margin-bottom, then its top and bottom margins collapse.

Some things to note:

More complex margin collapsing (of more than two margins) occurs when the above cases are combined.
These rules apply even to margins that are zero, so the margin of a descendant ends up outside its parent (according to the rules above) whether or not the parent's margin is zero.
When negative margins are involved, the size of the collapsed margin is the sum of the largest positive margin and the smallest (most negative) negative margin.
When all margins are negative, the size of the collapsed margin is the smallest (most negative) margin. This applies to both adjacent elements and nested elements.

Examples

HTML

<p>The bottom margin of this paragraph is collapsed …</p>
<p>… with the top margin of this paragraph, yielding a margin of <code>1.2rem</code> in between.</p>

<div>This parent element contains two paragraphs!
  <p>This paragraph has a <code>.4rem</code> margin between it and the text above.</p>
  <p>My bottom margin collapses with my parent, yielding a bottom margin of <code>2rem</code>.</p>
</div>

<p>I am <code>2rem</code> below the element above.</p>

CSS

div {
  margin: 2rem 0;
  background: lavender;
}

p {
  margin: .4rem 0 1.2rem 0;
  background: yellow;
}

Result

Specifications

Specification
Cascading Style Sheets Level 2 Revision 2 (CSS 2.2) Specification # collapsing-margins