The tax on selling stocks runs from 0% to 37% at the federal level, and which rate you pay depends on two things: how long you held the shares and how much total income you report for the year. Shares held one year or less are taxed as ordinary income, at rates up to 37% for 2026. Shares held longer than a year qualify for long-term capital gains treatment, capped at 20%. Higher earners owe an additional 3.8% surtax, most states add their own tax on top, and every sale carries two very small regulatory fees.
Short-Term Gains: Taxed Like a Paycheck
If you sell stock you have owned for one year or less, the profit is added to your wages and other income and taxed at your ordinary rate. For 2026, the federal brackets are:
- 10% on taxable income up to $12,400 single or $24,800 joint
- 12% on income from $12,401 to $50,400 single or $24,801 to $100,800 joint
- 22% from $50,401 to $105,700 single or $100,801 to $211,400 joint
- 24% from $105,701 to $201,775 single or $211,401 to $403,550 joint
- 32% from $201,776 to $256,225 single or $403,551 to $512,450 joint
- 35% from $256,226 to $640,600 single or $512,451 to $768,700 joint
- 37% above $640,600 single or $768,700 joint1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
If your salary already sits in the 24% bracket, a short-term stock gain is taxed at 24% until it pushes you into the next bracket. Your brokerage reports each sale on Form 1099-B with the proceeds, cost basis, and whether it was short- or long-term.2Internal Revenue Service. Instructions for Form 1099-B
Long-Term Gains: The Preferential Rates
Stock held for more than one year qualifies for long-term capital gains rates, which the tax code sets in three tiers.3Office of the Law Revision Counsel. 26 USC 1 – Tax Imposed For 2026:
- 0% on taxable income up to $49,450 single or $98,900 joint
- 15% from $49,451 to $545,500 single or $98,901 to $613,700 joint
- 20% above $545,500 single or $613,700 joint4Internal Revenue Service. Revenue Procedure 2025-32
Most investors sit in the 15% tier. On a sizable gain, the gap between that and a 24% or 32% short-term rate is real money.
The holding period has to exceed one full year. Buy shares on March 1, 2026, and you need to sell on March 2, 2027, or later. Sell on March 1, 2027, and the IRS treats it as short-term.5Internal Revenue Service. Topic No. 409, Capital Gains and Losses Check your acquisition date carefully before selling anywhere near the one-year mark.
The 3.8% Surtax on Higher Incomes
On top of the ordinary bracket or the long-term rate, the Net Investment Income Tax adds 3.8% once your modified adjusted gross income crosses $200,000 single or $250,000 joint.6Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax These thresholds are not adjusted for inflation, so the tax reaches more filers each year.
The 3.8% applies to the lesser of your net investment income or the amount by which your modified AGI exceeds the threshold. Someone earning $220,000 with $50,000 in stock gains pays the surtax on $20,000, not the full $50,000. At the top, the effective long-term rate becomes 23.8%. The surtax is reported on Form 8960.7Internal Revenue Service. Instructions for Form 8960
Using Losses to Cut the Tax
Losses on other stock sales reduce your taxable gains dollar for dollar. Short-term losses first offset short-term gains, and long-term losses first offset long-term gains; anything left over crosses to the other side.5Internal Revenue Service. Topic No. 409, Capital Gains and Losses
If total losses exceed total gains, you can deduct up to $3,000 of the net loss against wages or other ordinary income ($1,500 if married filing separately).8Office of the Law Revision Counsel. 26 USC 1211 – Limitation on Capital Losses That cap has been $3,000 since 1978 and does not adjust for inflation. Anything above the cap carries forward indefinitely and keeps its short- or long-term character in future years.9Office of the Law Revision Counsel. 26 U.S. Code 1212 – Capital Loss Carrybacks and Carryovers
Watch for the Wash Sale Rule
Sell a stock at a loss and buy the same or a substantially identical security within 30 days before or after, and the IRS disallows the loss. The window is 61 days total: 30 before, the sale day, and 30 after.10Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities
The disallowed amount is added to the cost basis of the replacement shares, so the deduction is deferred rather than lost. Brokerages track wash sales within a single account and adjust the 1099-B accordingly, but they do not track across accounts. Selling at a loss in a taxable account and repurchasing the same stock in your IRA within the window still counts as a wash sale, and no one flags it for you.2Internal Revenue Service. Instructions for Form 1099-B
Paying the Tax During the Year
If withholding from a paycheck won’t cover the tax on a large gain, you likely need to make an estimated payment for the quarter in which you sold. The IRS charges an underpayment penalty when you fall short.
You avoid the penalty by hitting one of these safe harbors: pay at least 90% of your current-year tax, or pay 100% of last year’s tax (110% if your prior-year AGI was above $150,000).11Internal Revenue Service. Topic No. 306, Penalty for Underpayment of Estimated Tax You also owe no penalty if the balance due after withholding and credits is under $1,000.
For 2026, quarterly deadlines fall on April 15, June 15, September 15, and January 15, 2027. Sell a large position in August, and the September 15 payment is the one to plan around. Use Form 1040-ES or IRS Direct Pay to send the money.
Small Regulatory Fees on Every Sale
Two fees hit every stock sale, and your broker passes both through to you.
The SEC charges a Section 31 fee to fund market oversight. For fiscal year 2026, the rate is $20.60 per million dollars of proceeds.12Federal Register. Order Making Fiscal Year 2026 Annual Adjustments to Transaction Fee Rates Exchanges collect it from sellers and remit it to the government.13Office of the Law Revision Counsel. 15 U.S. Code 78ee – Transaction Fees On a $10,000 sale, that’s about two cents. Buyers don’t pay it.
FINRA’s Trading Activity Fee is $0.000195 per share sold, capped at $9.79 per trade.14FINRA. Fee Adjustment Schedule On 100 shares, less than two cents. Both fees appear as line items on the confirmation and add to your cost basis, which slightly reduces the taxable gain.
State Tax on Top of Federal
Most states tax capital gains as ordinary income, adding roughly 2% to over 13% depending on where you live. Eight states levy no individual income tax, and Missouri specifically exempts capital gains. Washington goes the other direction, taxing only capital gains income on a graduated schedule that reaches 9% on gains above $1 million. The federal rates above are the floor for most investors, not the ceiling.