The federal long-term capital gains tax applies when you sell an asset you’ve held for more than one year, and the rate is 0%, 15%, or 20% depending on your taxable income and filing status. A 3.8% surtax stacks on top for higher earners, and a few asset categories carry their own higher ceilings. For 2026, a single filer pays nothing on long-term gains while taxable income stays at or below $49,450; a married couple filing jointly gets the 0% rate up to $98,900.
What Makes a Gain Long-Term
The tax code splits capital gains in two based on how long you owned the asset. A long-term gain comes from selling an asset held for more than one year.1Office of the Law Revision Counsel. 26 U.S. Code 1222 – Other Terms Relating to Capital Gains and Losses Short-term gains are taxed as ordinary income at your regular bracket, which can reach 37%. The difference in the tax bill is often large enough to change when you sell.
The IRS starts the holding-period count the day after you acquire the asset, and the day you sell counts. Stock bought March 10, 2025 and sold March 10, 2026 hits exactly one year, which is not enough. Selling on March 11, 2026 or later makes the gain long-term.2Internal Revenue Service. Publication 544 (2025), Sales and Other Dispositions of Assets Check your trade confirmation dates before you place the sell order.
2026 Rates and Income Thresholds
Your rate depends on your total taxable income, not just the gain. The 2026 thresholds, from IRS Revenue Procedure 2025-32, are:3Tax Foundation. 2026 Tax Brackets and Federal Income Tax Rates
0% rate applies to taxable income up to:
- Single: $49,450
- Married filing jointly: $98,900
- Head of household: $66,200
15% rate applies between:
- Single: $49,451 to $545,500
- Married filing jointly: $98,901 to $613,700
- Head of household: $66,201 to $579,600
20% rate applies above:
- Single: $545,500
- Married filing jointly: $613,700
- Head of household: $579,600
Most filers land in the 15% band. One detail catches people: your other income stacks below the gain, and a single sale can straddle two brackets. A single filer with $40,000 in wages and a $20,000 long-term gain pays 0% on the first $9,450 of that gain and 15% on the remaining $10,550.
The 3.8% Net Investment Income Tax
Higher earners pay an additional 3.8% surtax on top of the standard capital gains rate. The Net Investment Income Tax kicks in once modified adjusted gross income passes $200,000 for single filers or $250,000 for married couples filing jointly.4Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax The 3.8% is applied to the lesser of your net investment income or the amount by which your MAGI exceeds the threshold.
Those thresholds are not indexed for inflation, so more taxpayers cross them each year. A married couple in the 20% bracket with income above $250,000 pays an effective 23.8% on long-term gains.5Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
Higher Rates for Collectibles and Depreciated Real Estate
Two asset categories break the standard 0/15/20% pattern.
Collectibles, including coins, art, antiques, gems, stamps, and precious metals, carry a maximum long-term rate of 28%. If your ordinary bracket would put you lower, you pay the lower rate; the ceiling is 28%.6Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Depreciated real estate has its own calculation. The portion of gain attributable to depreciation you claimed on rental or business property is taxed at a maximum 25% rate, known as unrecaptured Section 1250 gain. Only the depreciation portion is taxed at 25%; any gain above your original purchase price falls back to the standard long-term rates.6Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Selling Your Home
The sale of a primary residence gets its own exclusion. You can exclude up to $250,000 of gain, or up to $500,000 for married couples filing jointly.7Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence You must have owned and lived in the home as your main residence for at least two of the five years before the sale. For the $500,000 joint exclusion, both spouses must meet the use test and at least one must meet the ownership test. The two years don’t need to be consecutive. Gain above the exclusion is taxed at the applicable long-term rate if you owned the home for more than a year.
Basis for Inherited vs. Gifted Assets
How you acquired the asset changes what counts as gain. The rules for inheritance and lifetime gifts move in opposite directions.
Inherited Property
When you inherit an asset, the cost basis resets to the fair market value on the date the prior owner died. If a parent bought stock for $10,000 decades ago and it was worth $200,000 at death, your basis is $200,000. Sell it for $205,000 and you owe tax on $5,000.8Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent The step-up wipes out tax on appreciation during the deceased person’s lifetime. If the asset lost value, the basis steps down instead; you don’t get to use the original higher purchase price.
Gifted Property
A lifetime gift carries the donor’s original cost basis with it. If your parent bought stock for $10,000 and gave it to you while alive, your basis stays $10,000 no matter what the stock is worth when you receive it.9Office of the Law Revision Counsel. 26 USC 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Selling for $200,000 produces a $190,000 gain. Choosing between gift and inheritance can shift the tax bill by tens of thousands.
Using Losses to Cut the Bill
Investment losses offset gains dollar for dollar. Long-term losses offset long-term gains first, and short-term losses offset short-term gains first; anything left crosses over to the other category.
If total losses exceed total gains for the year, you can deduct up to $3,000 of the net loss against ordinary income like wages. Married filing separately gets $1,500.10Office of the Law Revision Counsel. 26 USC 1211 – Limitation on Capital Losses The $3,000 cap hasn’t been adjusted since 1978.
Losses beyond the annual cap carry forward indefinitely. In each later year, the carried loss first offsets new gains, then up to $3,000 again reduces ordinary income. Nothing expires; a large loss keeps working until fully absorbed.
The Wash Sale Rule
Selling at a loss and immediately buying the same security back doesn’t produce a usable loss. Under the wash sale rule, if you sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the loss is disallowed for that year.11Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities
The disallowed loss isn’t lost permanently. It’s added to the basis of the replacement security and reduces gain when you sell that one, and the original holding period carries over. The 30-day window works in both directions, creating a 61-day danger zone. The rule also reaches across all your accounts, including IRAs and your spouse’s accounts, so switching brokerages doesn’t help.
Reporting the Sale
You need three numbers to figure the gain: cost basis, sale proceeds, and the acquisition and sale dates. Your brokerage reports these on Form 1099-B, usually issued in February.12Internal Revenue Service. Instructions for Form 1099-B Subtract commissions from proceeds, then subtract adjusted basis.
Each transaction goes on IRS Form 8949, with the totals flowing to Schedule D of Form 1040, where the correct rate is applied.13Internal Revenue Service. Instructions for Form 8949 – Sales and Other Dispositions of Capital Assets14Internal Revenue Service. About Form 8949, Sales and Other Dispositions of Capital Assets Tax software moves the numbers over automatically. Mismatches between what you report and what the broker sent the IRS are among the most common triggers for follow-up notices.
Estimated Taxes After a Big Sale
If a mid-year sale produces a tax liability your withholding won’t cover, the IRS expects quarterly estimated payments. Skipping them can bring an underpayment penalty charged as interest on the shortfall.
You generally avoid the penalty if you meet one of these safe harbors:15Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
- Total tax after withholding and credits is under $1,000.
- Withholding plus estimated payments cover at least 90% of this year’s tax.
- Payments equal at least 100% of last year’s total tax, or 110% if your prior-year AGI exceeded $150,000.
A W-2 employee who sells a large investment can often just raise payroll withholding for the rest of the year. Withholding is treated as paid evenly across the year, which can cure a shortfall even late in the year. Estimated payments, by contrast, have to land on the four quarterly due dates: April 15, June 15, September 15, and January 15 of the following year.