Federal long-term capital gains tax in 2026 is charged at 0%, 15%, or 20% depending on your taxable income, with the income thresholds nudged up for inflation. Short-term gains are still taxed as ordinary income. The bigger news is the One Big Beautiful Bill Act, signed in 2025, which reshaped the qualified small business stock exclusion, extended and rewrote the Opportunity Zone program, and created an installment option for certain farmland sales. Brokers are also issuing the new Form 1099-DA for digital asset transactions, and the stepped-up basis rule for inherited assets is unchanged.
2026 Long-Term Capital Gains Rates and Brackets
The federal code splits gains by holding period. Hold an asset one year or less and any profit is a short-term gain, taxed at your ordinary income rate, which for 2026 runs from 10% to 37%.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Hold it longer than a year and the gain gets the preferential 0%, 15%, or 20% rates.2Internal Revenue Service. Topic No. 409 Capital Gains and Losses
For 2026, single filers hit each bracket at these taxable income levels:
- 0% rate: up to $49,450
- 15% rate: $49,450 to $545,500
- 20% rate: above $545,500
Married couples filing jointly get the 0% rate up to $98,900, the 15% rate between $98,900 and $613,700, and the 20% rate above $613,700. Heads of household sit in the middle, with breakpoints at $66,200 and $579,600.
Two asset types run on their own tracks. Collectibles like art, coins, and precious metals are capped at a 28% rate. Unrecaptured depreciation on real estate is capped at 25%, covered further down.
The 3.8% Net Investment Income Tax
A separate surtax hits higher earners. The Net Investment Income Tax adds 3.8% on net investment income, capital gains included, once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for joint filers.3Internal Revenue Service. Net Investment Income Tax Those thresholds are set by statute and don’t move with inflation, so they pull in more households each year. Stacked on the 20% long-term rate, the effective federal top rate on long-term gains is 23.8%.
What the One Big Beautiful Bill Act Changed
The 2025 law left the core rate structure alone. It did not touch the stepped-up basis for inherited property, and it did not restrict long-term capital gains treatment for carried interest, despite earlier proposals to do so. The changes it did make are narrower.
Qualified Small Business Stock
Section 1202 used to work as an all-or-nothing rule: hold qualified small business stock at least five years and exclude 100% of the gain. For QSBS acquired after July 4, 2025, the exclusion phases in:
- Held at least 3 years: 50% excluded
- Held at least 4 years: 75% excluded
- Held 5 or more years: 100% excluded
Stock acquired before that date keeps its prior treatment, which generally allowed a full 100% exclusion after five years for shares acquired after September 2010. Investors selling newer QSBS before the five-year mark now walk away with a partial break instead of none.
Farmland Installment Option
The law created a new way to pay tax on farmland gains. If you sell qualified farmland to an active farmer and the property is subject to a restriction keeping it in agricultural use for at least 10 years after the sale, you can spread the resulting income tax over four equal annual payments.4Internal Revenue Service. One, Big, Beautiful Bill Provisions The property must have been used for farming during substantially all of the 10 years before the sale. The option applies to tax years beginning after July 4, 2025.
Opportunity Zones, Rewritten
The Opportunity Zone program was extended and reworked. For investments made after December 31, 2026, taxpayers can defer capital gains for five years and receive a 10% basis step-up at the five-year mark. The prior additional step-up at the seven-year mark is gone. The exclusion on new gains from a qualifying investment held at least 10 years remains, but gains are now capped at fair market value as of the 30th anniversary of the investment. For property in rural Opportunity Zones, the substantial improvement threshold drops from 100% to 50%.4Internal Revenue Service. One, Big, Beautiful Bill Provisions
Inherited Assets
Stepped-up basis survives untouched. When someone dies, the cost basis of their assets resets to fair market value on the date of death.5Internal Revenue Service. Gifts and Inheritances Sell inherited stock the next day at that value and you owe nothing on the built-up appreciation. Proposals to replace the rule with carryover basis or to treat death as a taxable event have not been enacted, and none of them made it into the 2025 law.
Selling Your Home
The biggest capital gains break for most households is Section 121. If you owned and lived in the home for at least two of the five years before the sale, you can exclude up to $250,000 of gain from income. Married couples filing jointly can exclude up to $500,000, as long as both spouses meet the use requirement and at least one meets the ownership requirement.6Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
The two years don’t have to be consecutive. You generally can’t claim the exclusion more than once every two years. Anything above the exclusion is taxed at the applicable capital gains rate.7Internal Revenue Service. Sale of Your Home In markets where a long-held home has appreciated well past those caps, the excess is fully taxable.
Depreciation Recapture on Rental and Commercial Property
Selling a rental or commercial building brings a tax layer that catches owners off guard. Depreciation deductions taken over the years you owned the property get partially clawed back at sale. The gain attributable to that depreciation is taxed at a maximum rate of 25%, on top of the regular capital gains rate on the rest of the appreciation.
The 25% figure is a ceiling. If your ordinary bracket is lower, recapture is taxed at that lower rate. Higher-income sellers also owe the 3.8% NIIT on recapture.3Internal Revenue Service. Net Investment Income Tax A cost segregation study that reclassifies building components as personal property can push some of that recapture up to full ordinary income rates. And the amount recaptured is based on depreciation “allowed or allowable,” so if you skipped taking the deductions, the IRS still taxes you as if you had.
Capital Losses and the Wash-Sale Rule
Losses offset gains dollar for dollar. When losses exceed gains in a given year, you can deduct up to $3,000 of the excess against ordinary income ($1,500 if married filing separately), and anything left over carries forward indefinitely.8Office of the Law Revision Counsel. 26 USC 1211 – Limitation on Capital Losses Short-term losses offset short-term gains first, long-term losses offset long-term gains first, and then any remainder crosses over.2Internal Revenue Service. Topic No. 409 Capital Gains and Losses
The wash-sale rule stops you from booking a loss while staying in essentially the same position. Sell a stock or security at a loss and buy back substantially identical shares within 30 days before or after the sale, and the loss is disallowed for that year.9Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities The disallowed loss is added to the basis of the replacement shares, so it isn’t gone; it’s postponed. The rule reaches stocks, bonds, ETFs, and mutual funds. It does not currently reach cryptocurrency, which leaves digital asset holders more room to harvest losses than stock investors have.
One boundary worth noting: losses on personal-use property like a car or household furniture don’t count. Only investment and business property qualifies.
Form 1099-DA for Digital Assets
Digital asset reporting is now on its own form. Brokers, cryptocurrency exchanges included, began reporting gross proceeds from digital asset sales for transactions occurring in 2025 using the new Form 1099-DA.10Internal Revenue Service. Understanding Your Form 1099-DA The first wave of forms was due to taxpayers by February 17, 2026.11Internal Revenue Service. Reminders for Taxpayers About Digital Assets
Cost basis reporting phases in a year later. For 2025 transactions, most Forms 1099-DA don’t include basis, so you’re responsible for calculating your own gain or loss.11Internal Revenue Service. Reminders for Taxpayers About Digital Assets Starting with 2026 transactions, brokers must report basis too. If you’ve traded crypto without keeping careful purchase records, reconstruct them now, before the IRS has a set of numbers to compare against yours.
Estimated Tax Payments After a Large Gain
Capital gains aren’t withheld the way wages are, so a big sale can leave you owing a penalty even if you file on time. The IRS generally imposes an underpayment penalty when you owe more than $1,000 at filing after subtracting withholding and refundable credits.12Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax
Two safe harbors get you out of the penalty. Pay at least 90% of the current year’s tax through withholding and estimated payments, or pay at least 100% of last year’s total tax. If your adjusted gross income last year was over $150,000 ($75,000 if married filing separately), the prior-year safe harbor rises to 110%. Estimated payments are due quarterly. When a gain lands in a single quarter, the annualized income installment method can reduce or eliminate the penalty for the earlier quarters when nothing was owed.
A single large gain from a home, business, or concentrated stock position can produce a five-figure tax bill that payroll withholding never touches. If you realize a significant gain mid-year, run the numbers before the next quarterly deadline; the safe harbor payment is cheaper than the penalty and interest.