Capital Gains Tax for Married Couples: Rates, Exclusions, and Basis

Capital gains tax for married couples depends on three things: your combined taxable income, whether you file jointly or separately, and what kind of asset you sold. A couple filing jointly in 2026 pays nothing on long-term gains until taxable income passes $98,900, pays 15% up to $613,700, and pays 20% above that.¹ Filing separately cuts every one of those thresholds exactly in half, which is why filing status is one of the biggest levers you have around the sale of stock, a home, or any other appreciated asset.

2026 Long-Term Rates by Filing Status

Long-term capital gains come from assets held more than one year and are taxed at 0%, 15%, or 20%. Short-term gains, on anything held a year or less, are taxed at ordinary income rates up to 37%.²

For 2026, married filing jointly:¹

0% on taxable income up to $98,900
15% on taxable income from $98,901 to $613,700
20% on taxable income above $613,700

Married filing separately:

0% on taxable income up to $49,450
15% on taxable income from $49,451 to $306,850
20% on taxable income above $306,850

The compression matters most when incomes are lopsided. A couple with $400,000 of combined taxable income, split roughly evenly, stays in the 15% bracket either way. But if one spouse earns $350,000 and the other earns $50,000, filing separately pushes the higher earner past $306,850 and into the 20% rate on gains that would have been taxed at 15% on a joint return.¹

The 3.8% Net Investment Income Tax

Higher-income couples face an additional 3.8% Net Investment Income Tax on top of the regular rates. The NIIT applies to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds the threshold for your filing status. Joint filers hit the threshold at $250,000 of MAGI. Married filing separately drops it to $125,000.³ Those thresholds are fixed by statute and do not adjust for inflation, so more couples cross them each year as incomes rise.

In practice, a joint filer with $500,000 of MAGI that includes $100,000 of long-term capital gains could pay 15% plus 3.8% on some or all of those gains, for a combined federal rate of 18.8%. At the top of the brackets, the combination reaches 23.8%.⁴ The NIIT is reported on Form 8960.⁵

Assets That Don’t Follow the 0/15/20% Rates

Some long-term gains carry their own maximum rates:

Collectibles like art, coins, and antiques: up to 28%.²
The portion of a real estate gain attributable to depreciation you previously claimed: up to 25%.²
Qualified small business stock in a C corporation held more than five years and acquired after September 27, 2010: 100% of the gain can be excluded from federal tax, up to the greater of $10 million or ten times your basis.⁶

The QSBS exclusion applies per issuer, so each spouse can potentially claim a separate exclusion on shares of the same company. For couples who invested early in a startup, that doubling can be substantial.

The $500,000 Home Sale Exclusion

Married couples filing jointly can exclude up to $500,000 of gain from selling their primary residence, double the $250,000 available to a single filer.⁷ For most couples, the exclusion wipes out the entire taxable gain. To claim the full $500,000, three conditions must be met:

At least one spouse owned the home for at least two of the five years before the sale.
Both spouses used the home as their primary residence for at least two of those five years. The two years don’t have to be consecutive.
Neither spouse claimed the exclusion on another home sale within the prior two years.

Any gain above $500,000 is taxed at the applicable long-term capital gains rate and counts as net investment income for the 3.8% NIIT if your MAGI is over the threshold.⁷⁴

Surviving Spouse

A surviving spouse can still claim the full $500,000 exclusion if the home is sold within two years of the spouse’s death and the ownership and use tests were met just before the death.⁷ After that two-year window closes, the surviving spouse files as single and the exclusion drops to $250,000.

Selling Before Two Years

If you sell before meeting the two-year ownership or use requirement, you may still qualify for a reduced exclusion when the sale is driven by a job relocation, a health condition, or certain unforeseen circumstances. The reduced exclusion is prorated based on how much of the two-year period you completed. A couple who lived in the home for 15 months before a qualifying job transfer could exclude up to $312,500 (15/24 of $500,000).⁷

Prior Rental or Second-Home Use

If the home was a rental or second home before becoming your primary residence, the share of the gain tied to that nonqualified use period cannot be excluded. The taxable share equals the ratio of nonqualified use time to total ownership time. Time after the home stopped being your primary residence does not count against you, and neither do absences of up to two years for health, job changes, or unforeseen circumstances.⁸

How Basis Works Between Spouses

Your capital gain is the sale price minus your adjusted basis, so what counts as basis is where most of the money is won or lost. Two rules change the math dramatically for married couples.

Transfers During Marriage and in Divorce

When one spouse transfers property to the other during the marriage, no gain or loss is recognized. The receiving spouse takes the same adjusted basis the transferring spouse had, and the holding period carries over. The same rule applies to transfers incident to a divorce, meaning transfers within one year of the divorce or related to ending the marriage.⁹

The carryover basis in divorce is where people get caught off guard. Receiving a rental property worth $500,000 in a settlement sounds like a clean deal, but if your ex-spouse’s basis was $150,000, you inherit that $150,000 basis. Selling triggers a $350,000 gain that was baked in before you ever owned it. The property’s current value tells you nothing about the tax bill hiding inside it, which matters enormously when negotiating who gets what.

Death of a Spouse and the Step-Up in Basis

When a spouse dies, property acquired from the decedent generally takes a new basis equal to its fair market value at the date of death.¹⁰ In common law states, only the deceased spouse’s half of jointly owned property receives the step-up. The surviving spouse’s half keeps its original, lower basis. For a home bought for $200,000 that’s now worth $800,000, the surviving spouse’s new basis would be roughly $500,000: the original $100,000 on their half plus a stepped-up $400,000 on the deceased spouse’s half.

Community property states are different. When one spouse dies, the entire community property asset receives a full step-up to fair market value, not just the deceased spouse’s half.¹⁰ In the same example, the surviving spouse’s basis would be the full $800,000. That full step-up can eliminate decades of built-up appreciation at once, letting the surviving spouse sell with little or no federal capital gains tax.

Capital Losses and Wash Sales

When capital losses exceed capital gains for the year, a couple filing jointly can deduct up to $3,000 of the excess against ordinary income like wages or interest. Filing separately drops the limit to $1,500 per spouse. Any unused loss carries forward indefinitely.¹¹ The $3,000 limit is fixed by statute and does not adjust for inflation.

The wash sale rule blocks a loss deduction if you repurchase a substantially identical security within 30 days before or after the sale. Courts have held that the wash sale rule itself applies to the individual taxpayer, not automatically to a spouse. But that doesn’t mean one spouse can sell at a loss while the other immediately buys the same stock. The IRS can disallow the loss under the related-party transaction rules, and the Supreme Court has done exactly that in a case where a husband managed his wife’s account and coordinated matching trades. Treat a spouse’s account the way you would treat your own for wash sale purposes.

Carryover losses also do not survive forever. If a spouse dies with unused capital loss carryovers, those losses can be used on the final joint return for the year of death, but they do not transfer to the surviving spouse in later years. A deceased spouse with $50,000 in accumulated carryovers who can only absorb $3,000 on the final return loses the remaining $47,000.

Reporting and Estimated Payments

Filing jointly, all capital asset sales from both spouses go on the same return. Brokers issue Form 1099-B showing proceeds and cost basis.¹² Individual transactions are reported on Form 8949, separated into short-term and long-term, and the totals flow onto Schedule D and then to Form 1040. If your 1099-B shows the correct basis and you have no adjustments, some transactions can be reported directly on Schedule D.¹³

A large gain mid-year can create an underpayment penalty if you don’t adjust withholding or make an estimated payment. You generally need to cover 90% of your current-year tax or 100% of last year’s tax, rising to 110% if your prior-year adjusted gross income exceeded $150,000 (or $75,000 filing separately).¹⁴ If the gain is a one-time event, you can annualize your income and make a larger estimated payment just for the quarter when the gain occurred. The Annualized Estimated Tax Worksheet in IRS Publication 505 calculates the payment, and Form 2210 with Schedule AI, attached to your return, shows the IRS that your uneven payments correspond to uneven income.¹⁵

If One Spouse Is a Nonresident Alien

A U.S. citizen or resident married to a nonresident alien can elect to file jointly by attaching a signed statement to the return declaring that both will be treated as U.S. residents for tax purposes. The nonresident spouse needs a Social Security Number or Individual Taxpayer Identification Number.¹⁶

The trade-off is real. Once the election is in effect, both spouses must report their worldwide income to the IRS, including capital gains earned abroad. The election gives you the wider joint brackets, the $500,000 home sale exclusion, and the higher $250,000 NIIT threshold, but every foreign bank account, investment gain, and rental income stream becomes reportable. Weigh the bracket savings against the compliance burden before making the election.¹⁶

1
Internal Revenue Service. Revenue Procedure 2025-32
2
Internal Revenue Service. Topic No. 409, Capital Gains and Losses
3
Internal Revenue Service. Net Investment Income Tax
4
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
5
Internal Revenue Service. 2025 Instructions for Form 8960
6
Office of the Law Revision Counsel. 26 US Code 1202
7
Office of the Law Revision Counsel. 26 USC 121
8
Office of the Law Revision Counsel. 26 US Code 121
9
Office of the Law Revision Counsel. 26 USC 1041
10
Office of the Law Revision Counsel. 26 US Code 1014
11
Office of the Law Revision Counsel. 26 US Code 1211
12
Internal Revenue Service. About Form 1099-B
13
Internal Revenue Service. Instructions for Form 8949 (2025)
14
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
15
Internal Revenue Service. Large Gains, Lump Sum Distributions, Etc.
16
Internal Revenue Service. Nonresident Spouse