Wealthy PotCapital Gains Tax: 2026 Rates, Thresholds and How It Is Calculated
When you sell an investment for more than you paid, the profit is a capital gain, and how it is taxed depends mostly on one thing: how long you held it. Hold for more than a year and the gain is taxed at 0%, 15% or 20% for 2026, rates well below those on wages. Hold for a year or less and it is taxed as ordinary income. For 2026 the 0% rate covers taxable income up to $49,450 for a single filer and $98,900 for a married couple filing jointly, per IRS Revenue Procedure 2025-32. This page gives every 2026 threshold, shows how the rate is actually calculated, and covers the legal ways to reduce the bill.
The Short Answer
- Held more than one year: long-term, taxed at 0%, 15% or 20% depending on your taxable income.
- Held one year or less: short-term, taxed at your ordinary income-tax rate, up to 37%.
- The 0% rate for 2026 applies up to $49,450 of taxable income (single), $98,900 (married filing jointly) and $66,200 (head of household).
- The 20% rate for 2026 starts above $545,500 (single), $613,700 (married filing jointly) and $579,600 (head of household).
- Higher earners may also owe the 3.8% net investment income tax, which starts at $200,000 of modified AGI for a single filer and $250,000 for a joint return, thresholds that are not indexed for inflation.
- Capital losses offset gains, and up to $3,000 of net loss a year ($1,500 if married filing separately) can be deducted against other income. The rest carries forward.
Short-Term vs Long-Term
The IRS draws the line at one year. In its words: "if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term."
The counting rule matters when you are close to the line. The IRS says you "generally count from the day after the day you acquired the asset up to and including the day you disposed of the asset." Shares bought on 10 March 2025 become long-term if sold on or after 11 March 2026, not on 10 March. Selling one day early can move a gain from the 15% rate to, say, the 24% ordinary bracket.
Two groups of assets escape the clock. Inherited property is treated as long-term "regardless of how long you held the property," per IRS Publication 550, so an heir who sells a week after receiving shares still gets the long-term rates. And qualified dividends are not gains at all, but the IRS taxes them "at lower capital gain rates," the same 0%, 15% and 20% schedule.
2026 Long-Term Capital Gains Rates
The brackets for long-term gains are set by taxable income, not by the size of the gain, and they are indexed for inflation each year.
| Filing status | 0% rate | 15% rate | 20% rate |
|---|---|---|---|
| Single | Up to $49,450 | $49,451 to $545,500 | Over $545,500 |
| Married filing jointly / surviving spouse | Up to $98,900 | $98,901 to $613,700 | Over $613,700 |
| Married filing separately | Up to $49,450 | $49,451 to $306,850 | Over $306,850 |
| Head of household | Up to $66,200 | $66,201 to $579,600 | Over $579,600 |
| Estates and trusts | Up to $3,300 | $3,301 to $16,250 | Over $16,250 |
For comparison, the 2025 figures, for returns being filed now, were:
| Filing status | 0% up to | 15% up to | 2026 change in 0% ceiling |
|---|---|---|---|
| Single | $48,350 | $533,400 | +$1,100 |
| Married filing jointly | $96,700 | $600,050 | +$2,200 |
| Married filing separately | $48,350 | $300,000 | +$1,100 |
| Head of household | $64,750 | $566,700 | +$1,450 |
Note that these thresholds do not line up with the ordinary income brackets. For 2026 the 0% capital gains ceiling of $49,450 sits just below the top of the 12% ordinary bracket, which our guide to the 2026 tax brackets sets out in full.
How the Rate Is Actually Worked Out
The most common misunderstanding is that a gain is taxed at a single rate chosen by your total income. It is not. Long-term gains are stacked on top of your ordinary taxable income, and each slice of the gain is taxed at the rate for the band it falls into.
Hypothetical example, for illustration only. A single filer has $40,000 of taxable ordinary income (after the standard deduction) and a $20,000 long-term gain, for $60,000 of taxable income in 2026.
- The ordinary income fills the first $40,000.
- The gain starts at $40,000. The 0% band runs to $49,450, so the first $9,450 of the gain is taxed at 0%.
- The remaining $10,550 falls in the 15% band: $1,582.50 of tax.
The effective rate on the whole $20,000 gain is about 7.9%, not 15%. The same stacking explains why a large one-off sale can push part of a gain into a higher band even for someone with a modest salary, and why spreading a sale across two tax years sometimes saves real money.
When the Rate Is Higher Than 20%
Some gains are carved out of the 0/15/20 schedule. The IRS lists the exceptions:
- Collectibles such as coins or art: "taxed at a maximum 28% rate."
- The taxable part of a gain on section 1202 qualified small business stock: maximum 28%.
- Unrecaptured section 1250 gain, the part of a gain on real estate that reflects depreciation already claimed: maximum 25%.
On top of any of these sits the net investment income tax. It is 3.8% on the lesser of your net investment income or the amount by which your modified AGI exceeds:
| Filing status | NIIT threshold (modified AGI) |
|---|---|
| Single or head of household | $200,000 |
| Married filing jointly or qualifying surviving spouse | $250,000 |
| Married filing separately | $125,000 |
Capital gains count as net investment income, so the highest federal rate on a long-term gain is effectively 23.8% (20% plus 3.8%). The NIIT does not apply to wages or to the excluded part of a gain on the sale of your main home.
Capital Losses and the $3,000 Limit
Losses are netted against gains first: short-term losses against short-term gains, long-term against long-term, and then the two results against each other. If you end the year with a net loss, the IRS lets you deduct "the lesser of $3,000 ($1,500 if married filing separately) or your total net loss" against other income, such as wages. Anything beyond that carries forward: in Publication 550's words, you can carry it over "until it is completely used up."
Two limits catch people out:
- Personal-use property does not count. "Losses from the sale of personal-use property, such as your home or car, aren't tax deductible."
- The wash sale rule. A loss is disallowed if, within 30 days before or after the sale, you buy "substantially identical stock or securities," including inside your IRA or Roth IRA, or if your spouse does. The disallowed loss is added to the cost basis of the new shares rather than lost for good.
Legal Ways to Pay Less
None of these is exotic. Each is a rule written into the tax code, and each has conditions worth reading before you rely on it.
1. Hold past the one-year mark
The single biggest lever. Moving a gain from short-term to long-term can cut the rate from 22% or 24% to 15%, or to 0% for lower incomes.
2. Use the 0% band deliberately
In a year when your taxable income is low (early retirement, a sabbatical, a year between jobs), you can realise long-term gains up to the 0% ceiling and pay no federal tax on them. Selling and buying back resets your cost basis higher, and the wash sale rule does not apply to gains, only to losses.
3. Harvest losses
Selling investments that are down to offset gains elsewhere, while respecting the 30-day wash sale window. Up to $3,000 of any net loss also offsets ordinary income.
4. Hold investments in tax-advantaged accounts
Trades inside a 401(k), traditional IRA or Roth IRA create no capital gains tax at the time of the trade. Traditional accounts are taxed as ordinary income on withdrawal instead; qualified Roth withdrawals are tax-free. See whether a Roth IRA is worth it for your situation.
5. The home sale exclusion
On the sale of your main home you may exclude "up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse," per IRS Topic no. 701. You generally must have owned the home and used it as your residence for at least 24 months of the five years before the sale.
6. Inherited assets and stepped-up basis
The basis of inherited property is generally "the FMV of the property at the date of the individual's death," per IRS Publication 551. Gains that built up during the original owner's lifetime are not taxed to the heir, and the heir's later sale is long-term automatically. Our guides to the estate tax and inheritance tax cover what happens to the estate itself.
7. Qualified small business stock, changed for new purchases
The One Big Beautiful Bill Act (Public Law 119-21, section 70431) expanded the section 1202 exclusion for qualified small business stock acquired after its enactment on 4 July 2025. For that stock the exclusion starts after 3 years: 50% of the gain at three years, 75% at four, and 100% at five or more. The per-company cap rises to $15 million for newly acquired stock, from $10 million. The rules on what counts as a qualified small business are strict, and this is an area for a tax professional.
One note on state tax: states with an income tax set their own treatment of capital gains, and the federal rates above do not include any state tax you may also owe.
Sources & Methodology
- IRS Revenue Procedure 2025-32, section 4.03, for the 2026 0% and 15% rate thresholds.
- IRS Revenue Procedure 2024-40, section 3.03, for the 2025 thresholds.
- IRS Topic no. 409, Capital gains and losses, for the holding period rule, the 28% and 25% rates, and the $3,000 loss limit.
- IRS Topic no. 559, Net investment income tax, and the IRS NIIT questions and answers, for the 3.8% tax and its unindexed thresholds.
- IRS Publication 550, for the wash sale rule and the long-term treatment of inherited property.
- IRS Publication 551, for the basis of inherited property.
- IRS Topic no. 701, for the home sale exclusion, and Topic no. 404 for qualified dividends.
- Public Law 119-21, section 70431, for the qualified small business stock changes.
FAQ
What is the capital gains tax rate for 2026?
Long-term gains (assets held more than a year) are taxed at 0%, 15% or 20% depending on taxable income. Short-term gains are taxed as ordinary income, at rates up to 37%.
How much capital gains can I make without paying tax in 2026?
Long-term gains fall in the 0% band as long as your total taxable income, gains included, stays at or below $49,450 for a single filer, $98,900 married filing jointly or $66,200 head of household.
When does the 20% capital gains rate apply?
For 2026, on the part of taxable income above $545,500 for a single filer, $613,700 married filing jointly, $306,850 married filing separately and $579,600 head of household.
What is the highest capital gains tax rate?
20% on most long-term gains, plus the 3.8% net investment income tax for higher incomes, for 23.8% in total. Collectibles can reach 28% before the NIIT, and unrecaptured section 1250 gain on real estate 25%.
How long do I have to hold a stock to get the long-term rate?
More than one year. Count from the day after you bought it, up to and including the day you sell.
How much of a capital loss can I deduct?
Losses first offset gains. A remaining net loss can offset up to $3,000 of other income a year, or $1,500 if married filing separately, with the rest carried forward.
Do I pay capital gains tax when I sell my house?
Often not. You can exclude up to $250,000 of gain, or $500,000 on a joint return, if you owned and lived in the home for at least two of the five years before the sale.
Do I pay capital gains tax on inherited stock?
Only on growth after the date of death. The basis is generally reset to the market value at death, and a later sale is treated as long-term however soon it happens.
This article is for general information and is not tax advice. 2026 figures are from IRS Revenue Procedure 2025-32 and other IRS publications listed above, checked against the primary sources on 2026-09-30. The worked example is hypothetical. Tax outcomes depend on your full return; consider a tax professional before a large sale.
