Capital Gains Tax 2026: Brackets, Rates, and How to Cut Your Bill

What Is a Capital Gain — and When Does It Get Taxed?

A capital gain is the profit you make when you sell an asset — a stock, a mutual fund, a rental property, cryptocurrency — for more than you paid for it. The IRS taxes that profit, but how much you pay depends on two things: how long you held the asset and how much other income you have in the same year.

The holding period is the biggest lever. Hold for one year or less and your gain is short-term, taxed as ordinary income at whatever bracket you’re in — up to 37% in 2026. Hold for more than one year and your gain is long-term, taxed at the preferential rates of 0%, 15%, or 20%. For most Americans, that distinction alone is worth thousands of dollars per trade.

One day makes the difference. If you bought shares on March 10, 2025, you need to sell on March 11, 2026 or later — not March 10 — to qualify for long-term treatment.

2026 Long-Term Capital Gains Tax Brackets

For tax year 2026 (the return you’ll file in early 2027), the IRS adjusted the income thresholds upward for inflation under IRS Revenue Procedure 2025-32. The rates themselves — 0%, 15%, and 20% — are unchanged, but the brackets are wider than 2025, meaning slightly more of your income falls into lower-rate territory.

Important: “Taxable income” here is your total taxable income for the year — wages, interest, business income, and capital gains combined, minus deductions. If you’re married filing jointly with $80,000 in wages and $30,000 in long-term gains, your total taxable income (after the 2026 standard deduction of $30,000 for joint filers) might be around $80,000 — placing the gains squarely in the 0% bracket. Run the numbers before you assume you owe 15%.

Always confirm current figures at IRS.gov — Topic No. 409 or with a tax professional, as thresholds are adjusted annually.

Short-Term Gains: The Expensive Alternative

Short-term capital gains are taxed as ordinary income. For 2026, that means rates from 10% to 37% depending on your bracket. The top bracket (37%) kicks in above $640,600 for single filers and $768,600 for married couples filing jointly, per IRS Revenue Procedure 2025-32.

Say you’re a single filer in the 22% ordinary income bracket. Selling a stock you’ve held for 11 months locks in a 22% rate on the gain. Wait one more month to cross the one-year mark and the same gain might cost you 15% — or 0% if your total income is low enough. The patience premium is real.

The Net Investment Income Tax (NIIT): A Surcharge Many Investors Miss

If your income exceeds certain thresholds, you may also owe an additional 3.8% Net Investment Income Tax (NIIT) on top of the regular capital gains rate. This surcharge applies to:

• Single filers with modified adjusted gross income (MAGI) above $200,000
• Married filing jointly with MAGI above $250,000

These thresholds have not been adjusted for inflation since the NIIT was enacted in 2013 — they remain frozen at $200,000 and $250,000 as of 2026 (per IRS Form 8960 instructions). So a high earner selling appreciated stock could face a combined federal rate of 23.8% (20% + 3.8%), before any state tax.

Worked Example: What Sarah and Dave Actually Owe

Let’s put some real numbers to this. Sarah and Dave file jointly in 2026. Their combined wages are $140,000. After the standard deduction of $30,000 for joint filers, their ordinary taxable income is $110,000. During the year, they also sell stock they’ve held for four years, realizing a long-term capital gain of $25,000.

Step 1 — Find their total taxable income. $110,000 (wages, after deduction) + $25,000 (long-term gain) = $135,000 total taxable income.

Step 2 — Check the 0% bracket. For MFJ, the 0% threshold is $98,900. Their ordinary taxable income is already $110,000 — so the 0% bracket is fully used up by wages alone.

Step 3 — Apply 15% to the capital gain. The entire $25,000 long-term gain falls in the 15% bracket (since $110,000 + $25,000 = $135,000, well below $613,700). Tax owed on gains: $25,000 × 15% = $3,750.

Step 4 — Check NIIT. Their MAGI is $165,000 — below the $250,000 MFJ threshold. No NIIT applies.

Total federal capital gains tax: $3,750. Had they sold after holding for only eight months, the $25,000 gain would have been taxed as ordinary income at 22%, costing $5,500 — $1,750 more for the exact same profit.

Collectibles, Real Estate, and Special Cases

Not every long-term gain qualifies for the standard 0/15/20% schedule. A few categories follow different rules:

• Collectibles (art, coins, antiques, precious metals held outside an ETF) are taxed at a maximum of 28% for long-term gains, per IRS Topic 409. Short-term rates still apply if held one year or less.
• Home sale exclusion: If you sell your primary residence and meet the IRS ownership and use tests, you can exclude up to $250,000 of gain ($500,000 married filing jointly) from tax entirely — per IRS Topic 701. Only the gain above those limits is subject to capital gains tax.
• Depreciation recapture on rental property: When you sell a rental property, any depreciation you claimed gets recaptured and taxed at a maximum rate of 25%, per IRS Publication 544. The remaining gain uses the standard long-term rates.
• Cryptocurrency: The IRS treats crypto as property, not currency. The same holding-period rules apply — under one year is short-term, over one year is long-term (IRS Notice 2014-21, still the controlling guidance as of 2026).

Five Legal Ways to Reduce Your Capital Gains Tax Bill

None of these are loopholes — they’re built into the tax code. Used deliberately, they can cut your bill significantly.

1. Harvest losses to offset gains. If you have positions sitting at a loss, selling them locks in a capital loss that offsets gains dollar-for-dollar. If losses exceed gains, you can deduct up to $3,000 against ordinary income annually and carry the rest forward indefinitely. (IRS Schedule D rules, 2026.)
2. Time your sales across tax years. If you have a large gain late in the year and expect lower income next year — perhaps retirement, a career change, or a sabbatical — waiting until January shifts the tax liability to the following year’s return.
3. Sell in a low-income year to hit the 0% bracket. Retirees drawing from pre-tax accounts sometimes have surprisingly low taxable income. A single filer with taxable income under $49,450 in 2026 pays zero federal tax on long-term capital gains. Deliberately realizing gains in such a year — sometimes called “gain harvesting” — can permanently eliminate the tax on appreciated shares.
4. Use tax-advantaged accounts for high-growth positions. Capital gains inside a Roth IRA are never taxed on withdrawal. Holding high-growth stocks inside a Roth and lower-growth assets in taxable accounts is a basic portfolio location strategy endorsed by the CFPB. High earners who exceed the Roth contribution income limits may still use the backdoor Roth IRA strategy to access these benefits.
5. Donate appreciated stock to charity instead of cash. If you give appreciated shares you’ve held over one year directly to a qualified charity, you avoid the capital gains tax entirely and claim a deduction for the full fair market value (subject to AGI limits). IRS Publication 526 covers charitable contribution rules.

This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax laws change — thresholds and rates listed here are based on IRS Revenue Procedure 2025-32 and Tax Foundation analysis as of 2026. Confirm current rules at IRS.gov or consult a qualified tax professional before making investment or tax decisions.