Capital gains tax rates depend on two things: how long you held the asset and how much total taxable income you have. Sell an asset you owned for more than a year and the profit is taxed at 0%, 15%, or 20% under the long-term schedule. Sell one you held a year or less and the gain is taxed at your ordinary income rate, which for 2026 runs from 10% up to 37%.1Office of the Law Revision Counsel. 26 USC 1222 – Long-Term Capital Gain Definition
Long-Term Capital Gains Rates for 2026
The long-term rate schedule sits in Section 1(h) of the Internal Revenue Code, and the IRS adjusts the income thresholds each year for inflation.2Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed For tax year 2026, Revenue Procedure 2025-32 sets the brackets as follows:3Internal Revenue Service. Rev. Proc. 2025-32
- 0% rate: taxable income up to $49,450 for single filers, $98,900 for married filing jointly, and $66,200 for head of household.
- 15% rate: taxable income above those amounts up to $545,500 single, $613,700 joint, and $579,600 head of household.
- 20% rate: taxable income above the 15% ceiling.
The rate that applies to your gain depends on your total taxable income, not the gain in isolation. The IRS stacks the gain on top of your other income. If you earn $80,000 in wages and clear $30,000 selling stock, part of that $30,000 may sit in the 0% zone and part in the 15% zone, depending on your deductions and filing status. A bonus, a Roth conversion, or a retirement distribution in the same year can push a gain that looked tax-free into a taxable bracket.
Short-Term Gains Are Taxed Like Wages
Hold an asset for a year or less and there is no preferential rate. The gain is ordinary income, taxed at whatever bracket your total income lands in for 2026, up to 37%. The difference between 11 months and 13 months of ownership can nearly double your tax on the same sale. If you are close to the one-year mark and the price is stable, waiting until you cross into long-term territory usually pays.
When 15% Is Not the Ceiling
Two categories of long-term gains have their own maximum rates written into Section 1(h), and both can catch investors off guard.2Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed
Collectibles are capped at 28%. That covers art, antiques, coins, stamps, precious metals, and gems. Physically backed gold and silver ETFs structured as grantor trusts fall in this bucket too, because you effectively own the metal.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses If your ordinary rate is below 28%, you pay the lower one; the 28% is a ceiling, not a floor.
Unrecaptured Section 1250 gain is capped at 25%. When you sell rental property or other depreciable real estate at a profit, the slice of the gain equal to the depreciation you claimed over the years is taxed at up to 25%. Anything beyond that recaptured depreciation is taxed under the regular long-term schedule.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses Landlords who plan around the 15% rate often forget this and receive a larger bill than expected.
The 3.8% Net Investment Income Tax
Higher earners pay an extra 3.8% on investment income under Section 1411 of the Internal Revenue Code.5Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax It kicks in when your modified adjusted gross income exceeds a fixed threshold:
- $200,000 for single and head of household filers
- $250,000 for married filing jointly
- $125,000 for married filing separately
The surtax equals 3.8% of the smaller of your net investment income or the amount by which your MAGI exceeds the threshold.6Office of the Law Revision Counsel. 26 US Code 1411 – Imposition of Tax Net investment income includes capital gains, interest, dividends, rental income, and royalties.7Internal Revenue Service. Topic No. 559, Net Investment Income Tax These thresholds are not indexed for inflation, so more filers hit them every year.
Combined with the top long-term bracket, a single filer with MAGI above $200,000 who lands in the 20% zone pays an effective federal rate of 23.8% on long-term gains.
Selling Your Home
Section 121 shields most home sales from capital gains tax entirely. A single filer can exclude up to $250,000 of profit on the sale of a main home. Married couples filing jointly can exclude up to $500,000.8Office of the Law Revision Counsel. 26 US Code 121 – Exclusion of Gain From Sale of Principal Residence Anything above those amounts is taxed at long-term rates.
To qualify, you must have owned and used the property as your primary residence for at least two of the five years before the sale.9Internal Revenue Service. Topic No. 701, Sale of Your Home The two years do not need to be consecutive. You generally cannot use the exclusion more than once every two years.
If you sell before hitting the two-year mark, a prorated exclusion is still available when the sale is prompted by a job relocation, a health condition, or an unforeseeable event such as a natural disaster or divorce.10Internal Revenue Service. Publication 523 (2025), Selling Your Home The partial amount is scaled to the fraction of the two years you did meet. One year of qualifying use gets you half the full exclusion.
Inherited Assets Get a Stepped-Up Basis
Inheriting an asset resets your cost basis to its fair market value on the date of death, under Section 1014.11Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent A house your parent bought for $80,000 that is worth $400,000 when they die has a basis of $400,000 in your hands. Sell it soon after for $405,000 and only $5,000 is taxable gain. The rule applies whether you inherit through a will, a revocable trust, joint tenancy with right of survivorship, or a transfer-on-death deed.
Gifts during the giver’s lifetime do not get this treatment. If the same parent gives you the house while alive, you take their $80,000 basis and owe tax on the full appreciation when you sell.
Using Losses to Cut the Bill
Capital losses offset gains dollar for dollar. Short-term losses first offset short-term gains; long-term losses first offset long-term gains. Anything left over crosses to the other type. If losses still exceed gains after all the netting, you can deduct up to $3,000 of the remainder against ordinary income each year ($1,500 if married filing separately), and carry the rest forward indefinitely.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Watch the Wash Sale Rule
You cannot sell a security at a loss and buy it right back to harvest the tax break. Under Section 1091, the loss is disallowed if you buy substantially identical stock or securities within 30 days before or after the sale.12Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities That gives you a 61-day blackout window around the sale.
A disallowed loss is not lost forever. It is added to the basis of the replacement shares, so you get the benefit when you eventually sell those. Investors often sidestep the rule by buying a different fund that tracks a similar index; funds from different providers are not treated as substantially identical even when they behave alike.
State Tax Sits on Top of the Federal Rate
Most states tax capital gains as ordinary income, so your state rate stacks on the federal one. State rates run from zero in states with no income tax to over 13% in the highest-tax states. A few states offer preferential treatment for long-term gains, but the standard treatment is full ordinary-income rates. For a high earner in a high-tax state, the combined federal and state hit on a long-term gain can top 30%.
Reporting Sales and Paying on Time
Every sale of a capital asset is reported on your return, even one that falls entirely within the 0% bracket. Your broker sends the IRS a Form 1099-B showing proceeds and cost basis, and the agency’s systems match it to your return. Gains and losses land on Schedule D of Form 1040.13Internal Revenue Service. About Schedule D (Form 1040), Capital Gains and Losses Missing a reported sale usually triggers an automated notice.
A large mid-year sale can also trigger an estimated-tax problem. Your paycheck withholding will not cover the extra liability, and the IRS expects quarterly payments as income comes in. Underpay by too much and you owe a penalty even if you settle the full balance at filing.14Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
Two safe harbors keep you clear. Pay at least 90% of the current year’s tax, or pay 100% of last year’s tax. If your prior-year AGI exceeded $150,000 ($75,000 if married filing separately), the second option becomes 110% of last year’s tax.15Internal Revenue Service. Estimated Tax – Individuals After a one-time windfall, the 110% option is usually the safer bet, because last year’s tax is a known number while this year’s is still moving.