Capital Gains Tax 2026: Rates, Brackets and Worked Examples

Short-Term vs Long-Term: The One-Year Line

The IRS draws one bright line. Sell an asset you held for one year or less, and the profit is a short-term capital gain, taxed just like your salary — at your regular income tax rate, anywhere from 10% to 37% in 2026. Sell something you held for more than one year, and it qualifies as a long-term capital gain, which gets the special lower rates of 0%, 15%, or 20%.

That distinction is worth real money. Two investors, each with a $50,000 gain: Daniel sells stock bought four months ago and pays ordinary rates on the whole thing. Maya sells shares held for three years, lands in the 15% band, and owes $7,500. Same profit, same market — thousands of dollars apart, decided by the calendar.

The clock starts the day after you buy and includes the sale date. Bought on March 10, 2025, sold on March 11, 2026? Long-term. Sold on March 9, 2026? Short-term. Close to the line, two days can change your rate dramatically.

A few assets break the pattern — collectibles like art and coins face a 28% maximum rate, and qualified small business stock has its own rules. This article covers the standard stock, fund, and real estate cases.

The 2026 Long-Term Capital Gains Brackets

These thresholds come from IRS Revenue Procedure 2025-32 and apply to assets sold in 2026 (reported on 2027 returns). They are based on taxable income — income after deductions — not your gross salary or the sale price.

Single filers:

• 0% — taxable income up to $49,450
• 15% — $49,451 to $545,500
• 20% — over $545,500

Married filing jointly:

• 0% — taxable income up to $98,900
• 15% — $98,901 to $613,700
• 20% — over $613,700

Head of household filers get a 0% band up to $66,200 and a 15% band up to $579,600. Married filing separately mirrors the single brackets up to a $306,850 top of the 15% band.

The crucial detail: your gain stacks on top of your other income. Wages and ordinary income fill the lower part of the brackets first, and the gain sits on top of that pile. A $40,000 gain means very different things for someone earning $30,000 and someone earning $300,000.

How to Figure Out What You Owe on a Sale

Here is the walkthrough, in the order a tax return actually does it:

Step 1: Find your gain. Sale price minus your cost basis — what you paid, plus commissions, plus property improvements. Reinvested dividends also add to basis, a detail ETF investors routinely forget.

Step 2: Check the holding period. More than one year between purchase and sale gives long-term treatment. One year or less means short-term, taxed at ordinary rates.

Step 3: Compute taxable income including the gain. Add the gain to wages, interest, and other income, then subtract your standard or itemized deduction. The 2026 standard deduction is $16,100 for single filers and $32,200 for married filing jointly.

Step 5: Check for the net investment income tax. If your modified adjusted gross income is over $200,000 (single) or $250,000 (married filing jointly), you may owe an extra 3.8% — see the NIIT section below.

The US Capital Gains Tax Calculator on this site runs all five steps for you if you want a fast estimate.

Worked Example: Maya Sells Stock After Three Years

Let's put it all together with real numbers. Maya is a single filer. In 2026 she earns $80,000 in wages and sells stock she has held for three years: sale price $70,000, cost basis $20,000.

Gain: $70,000 − $20,000 = $50,000 long-term gain.

Taxable income: $80,000 wages + $50,000 gain = $130,000 gross. Minus the $16,100 standard deduction = $113,900 taxable income.

Bracket stacking: Her ordinary taxable income ($80,000 − $16,100 = $63,900) fills the bottom first. The single 0% band tops out at $49,450 — already full — so her entire $50,000 gain lands in the 15% band (total taxable income of $113,900 is well under the $545,500 ceiling).

Federal capital gains tax: $50,000 × 15% = $7,500.

NIIT check: Her MAGI is $130,000, below the $200,000 single threshold. No surtax.

Total federal tax on the sale: $7,500 — a 15% effective rate on the $50,000 profit.

Compare Daniel's version: same $50,000 gain, but held only four months. Short-term means ordinary rates — his gain stacks on $63,900 of ordinary income, landing mostly in the 22% bracket, for roughly $11,000. Holding eight more months to cross the one-year line would have saved him about $3,500.

The 3.8% Net Investment Income Tax

High earners face a second layer. The Net Investment Income Tax (NIIT) adds 3.8% on top of regular capital gains tax when your modified adjusted gross income exceeds:

• $200,000 — single or head of household
• $250,000 — married filing jointly
• $125,000 — married filing separately

It applies to the lesser of (a) your net investment income or (b) the amount by which your MAGI exceeds the threshold. Crossing the line does not tax all your investment income — only the excess slice.

The thresholds are not adjusted for inflation and have not moved since 2013, so the tax catches more people every year. Worse, one big sale can push you over: a married couple with $240,000 of wages is below the $250,000 line until a $60,000 stock sale lifts their MAGI to $300,000. The NIIT is 3.8% of the lesser of net investment income ($60,000) and the excess ($50,000) = $1,900, on top of the capital gains tax. A top-bracket earner fully subject to both faces 23.8% federal on gains (20% + 3.8%) — before state tax. Near the thresholds, time large sales across tax years when you can.

Mistakes to Avoid

Selling two days before the one-year mark. Holding 364 days vs 366 days is the difference between ordinary rates and 0/15/20%. Check the purchase date before you sell.

Forgetting that deductions change the bracket math. The thresholds apply to taxable income, not gross income. A $70,000 salary is not $70,000 of taxable income after the $16,100 standard deduction — and that difference can drop part of your gain into a lower band.

Ignoring basis adjustments. Commissions, fees, reinvested dividends, and property improvements all raise your basis and shrink the taxable gain. Pull your brokerage's cost-basis records before estimating.

Letting a big sale trigger the NIIT unplanned. Near $200,000 single / $250,000 joint, model the sale first. Splitting sales across December and January, or offsetting with capital losses, can keep you under the line.

Assuming state tax works like federal. Most states tax capital gains as ordinary income — no 0/15/20% schedule. A 15% federal rate can become 24% or more all-in.

Worrying about gains inside retirement accounts. IRAs and 401(k)s do not generate capital gains tax on trades inside the account. These brackets only apply to taxable brokerage accounts.