How US Federal Capital Gains Tax Rates and Rules Work

Federal capital gains tax rates run from 0% to 20% on profits from assets you held longer than one year, and from 10% to 37% on profits from assets you held one year or less. The rate you actually pay depends on how long you owned the asset, your filing status, and your total taxable income. For the 2026 tax year, a single filer pays 0% on long-term gains as long as taxable income stays below $49,450; a married couple filing jointly can reach $98,900 before any long-term gains tax applies.

Why the Holding Period Decides Everything

The single biggest factor in your rate is how long you owned the asset before selling. Held for one year or less, the profit is a short-term capital gain taxed at ordinary income rates. Held for more than one year, it qualifies as a long-term capital gain taxed at the lower preferential rates.¹

Your holding period starts the day after you acquire the asset. Buy stock on March 1, and your clock starts March 2. To qualify for long-term treatment, you have to sell on or after March 2 of the following year. Miss that threshold by a single day and the entire gain gets taxed at ordinary rates, which for high earners is nearly double the top long-term rate.

Inherited property is a special case. No matter how quickly you sell after the previous owner’s death, inherited assets are automatically treated as long-term.²

2026 Long-Term Capital Gains Rates

Long-term gains sit in one of three tiers: 0%, 15%, or 20%. Which one applies depends on your filing status and taxable income. For the 2026 tax year, the thresholds are:³

0% rate: single filers with taxable income up to $49,450; married filing jointly up to $98,900; heads of household up to $66,200.
15% rate: single filers above $49,450 but not more than $545,500; married filing jointly above $98,900 but not more than $613,700; heads of household above $66,200 but not more than $579,600.
20% rate: taxable income above the 15% thresholds for your filing status.

Most investors land in the 15% bracket. The 0% rate is genuinely useful for retirees and lower-income earners who can time gains to fall in years when other income is low. The 20% rate only reaches single filers earning above $545,500 or joint filers above $613,700.

2026 Short-Term Capital Gains Rates

Short-term gains get no preferential treatment. The profit is added to your other income and taxed at your ordinary income rate. For 2026, the brackets are:³

10%: single up to $12,400; joint up to $24,800
12%: single over $12,400; joint over $24,800
22%: single over $50,400; joint over $100,800
24%: single over $105,700; joint over $211,400
32%: single over $201,775; joint over $403,550
35%: single over $256,225; joint over $512,450
37%: single over $640,600; joint over $768,700

A short-term gain for someone in the 37% bracket costs nearly double what the same gain would cost if the asset had been held one more day to qualify for the 20% long-term rate. That gap is why tax advisors push clients toward longer holding periods, and why frequent traders feel the tax bite hardest.

How Long-Term Gains Stack on Top of Ordinary Income

A common misunderstanding is that your capital gains rate depends only on the size of the gain. It doesn’t. Long-term gains stack on top of your ordinary income when determining which bracket applies. Wages, salary, business income, and other ordinary income fill the brackets first. Long-term gains sit on top, and the rate that applies depends on where that stacked total lands.

Say you’re a single filer with $40,000 in wages and a $20,000 long-term capital gain. Your ordinary income occupies the first $40,000 of bracket space. Your gain stacks on top: $9,450 of it falls within the 0% bracket (up to the $49,450 threshold), and the remaining $10,550 gets taxed at 15%. Without the stacking rule in mind, you might assume the entire $20,000 qualifies for 0% because your baseline income is modest.

The 3.8% Net Investment Income Tax

Higher earners face an additional 3.8% surtax on investment income, capital gains included. The Net Investment Income Tax applies to the lesser of your net investment income or the amount by which your modified adjusted gross income exceeds these thresholds:⁴

Single or head of household: $200,000
Married filing jointly: $250,000
Married filing separately: $125,000

These thresholds have never been adjusted for inflation since the tax took effect in 2013, so more taxpayers cross them each year. The surtax stacks on top of whatever capital gains rate you already owe. For someone in the 20% long-term bracket who also triggers the NIIT, the effective federal rate on long-term gains reaches 23.8%.⁵

Higher Rates on Collectibles and Depreciated Real Estate

Not every long-term gain qualifies for the 0/15/20% rates. Two categories face higher maximum rates.

Collectibles including art, coins, precious metals, stamps, and antiques are taxed at a maximum long-term rate of 28%. If your ordinary income puts you in a bracket below 28%, you pay your regular rate instead. But for most people selling valuable collectibles, the 28% ceiling is what applies, well above the 15% rate most stock investors pay.¹

Depreciated real estate carries its own rate on what’s called unrecaptured Section 1250 gain. When you sell rental or business property, any gain attributable to depreciation deductions you took during ownership is taxed at a maximum rate of 25%. Only the portion of the gain above your original cost basis then qualifies for the standard long-term rates.¹

The Primary Residence Exclusion

Homeowners can exclude up to $250,000 of gain from the sale of a primary residence, or up to $500,000 for married couples filing jointly.⁶ To qualify, you must have owned and used the home as your primary residence for at least two of the five years before the sale. Those two years don’t have to be consecutive.

For married couples, both spouses must meet the use test, though only one has to meet the ownership test. You can generally use this exclusion once every two years. In markets where home values have risen sharply, this carve-out often eliminates federal capital gains tax on the sale entirely. Any gain above the exclusion amount is taxed at the standard long-term rates, assuming you owned the home for more than a year.

Offsetting Gains With Capital Losses

Capital losses offset capital gains dollar-for-dollar. Sell one stock at a $15,000 gain and another at a $10,000 loss, and you’re taxed on the net $5,000 gain. Short-term losses first offset short-term gains; long-term losses first offset long-term gains. Any remaining losses then cross over to offset the other category.

If total losses exceed total gains for the year, you can deduct up to $3,000 of the excess against ordinary income ($1,500 if married filing separately). Losses beyond that carry forward indefinitely to future tax years.¹ A bad year in the market isn’t entirely wasted from a tax standpoint, but the $3,000 annual cap makes large losses slow to absorb.

The Wash Sale Rule

You can’t sell an investment at a loss, claim the deduction, and immediately buy it back. If you purchase a substantially identical security within 30 days before or after the sale, the IRS disallows the loss. The disallowed amount gets added to the basis of the replacement security, so it isn’t permanently lost, but you can’t use it to offset gains this year. Investors who want to harvest losses while staying invested in a similar sector typically buy a different fund or security tracking a related but not identical index.

Estimated Tax Payments After a Large Gain

Realize a large capital gain during the year and you may need to make quarterly estimated payments rather than waiting until you file. The IRS expects estimated payments when you expect to owe $1,000 or more after subtracting withholding and credits.⁷

The 2026 estimated tax deadlines are:

Income from January 1 through March 31: due April 15
Income from April 1 through May 31: due June 15
Income from June 1 through August 31: due September 15
Income from September 1 through December 31: due January 15, 2027

You can avoid an underpayment penalty by paying at least 90% of your 2026 tax liability or 100% of what you owed in 2025, whichever is smaller. If your 2025 adjusted gross income exceeded $150,000 ($75,000 if married filing separately), the safe harbor rises to 110% of last year’s tax.⁷ If a large gain hits mid-year, the annualized income installment method lets you match payments to when the income actually occurred rather than spreading the liability evenly across quarters.

1
Internal Revenue Service. Topic No. 409, Capital Gains and Losses
2
Office of the Law Revision Counsel. 26 USC 1223 – Holding Period of Property
3
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
4
Internal Revenue Service. Net Investment Income Tax
5
Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
6
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
7
Internal Revenue Service. Publication 505, Tax Withholding and Estimated Tax