Long-term capital gains tax is the federal tax on profit from selling an asset you owned for more than one year. The rate is 0%, 15%, or 20% depending on your taxable income, which is well below the rates that apply to wages or to gains on assets held a year or less. A single filer in 2026 pays nothing on long-term gains until taxable income passes $49,450, and the 20% rate only starts above $545,500. Higher earners may owe an extra 3.8% surtax, and a few asset types carry their own ceilings.
When a Gain Counts as Long-Term
You need to own the asset for more than one year before selling.1Office of the Law Revision Counsel. 26 USC 1222 – Other Terms Relating to Capital Gains and Losses The clock starts the day after you acquire it. Buy stock on March 1, 2025, and the earliest sale date that qualifies for long-term treatment is March 2, 2026. Sell one day early and the whole gain is short-term, taxed at your ordinary rate, which can reach 37%.
Inherited property is the important exception. It automatically qualifies as long-term no matter how quickly you sell after the decedent’s death.2Office of the Law Revision Counsel. 26 US Code 1223 – Holding Period of Property
Almost anything you own qualifies as a capital asset: stocks, bonds, mutual funds, real estate, vehicles, jewelry, cryptocurrency, household items.3Office of the Law Revision Counsel. 26 USC 1221 – Capital Asset Defined Inventory held for sale to customers, depreciable business equipment, and trade accounts receivable are the main things that don’t.
2026 Long-Term Capital Gains Tax Brackets
Your ordinary income fills the lower brackets first, and long-term gains stack on top. Where the gain lands in that stack decides the rate. The 2026 thresholds from IRS Revenue Procedure 2025-32:4Internal Revenue Service. Revenue Procedure 2025-32
- 0% rate: taxable income up to $49,450 single, $98,900 married filing jointly, $66,200 head of household.
- 15% rate: income above those figures up to $545,500 single, $613,700 married filing jointly, $579,600 head of household.
- 20% rate: income above the 15% ceiling.
Most filers land in the 15% bracket. The 0% rate can matter in a low-income year, such as early retirement before required distributions begin. The 20% rate reaches only high earners well into the top ordinary brackets.
Higher Rates on Collectibles
Long-term gains on artwork, stamps, antiques, gems, and precious metals face a maximum rate of 28% instead of 20%.5Office of the Law Revision Counsel. 26 US Code 1 – Tax Imposed If your regular long-term rate would be 15%, collectibles are taxed at 15% too. The 28% cap only bites when you’d otherwise be in the 20% bracket. Gold and silver bullion held through certain ETFs often falls into this category and catches investors off guard.
Depreciation Recapture on Rental Real Estate
Sell a rental property at a gain and the portion of the profit tied to depreciation you claimed over the years is taxed at up to 25%.6Internal Revenue Service. Topic No. 409, Capital Gains and Losses Only the gain above the recaptured amount gets the standard 0/15/20 treatment. Those depreciation deductions reduced your taxable income while you owned the property; the IRS reclaims some of that benefit at sale.
The 3.8% Net Investment Income Tax
An additional 3.8% Net Investment Income Tax applies on top of the regular rate once modified adjusted gross income passes $200,000 single, $250,000 married filing jointly, or $125,000 married filing separately.7Internal Revenue Service. Topic No. 559, Net Investment Income Tax The 3.8% hits the lesser of your net investment income or the amount by which your income exceeds the threshold. These thresholds don’t adjust for inflation, so more taxpayers cross them each year. Combined with the 20% bracket, the top federal rate on long-term gains reaches 23.8%.
Calculating the Gain
Three numbers matter: your cost basis, the amount realized on the sale, and the difference between them.
Cost basis is what you paid, plus acquisition costs like broker commissions or closing fees, plus any capital improvements to real property.8Office of the Law Revision Counsel. 26 USC 1012 – Basis of Property, Cost Amount realized is what you received minus selling expenses such as commissions and transfer taxes.9Office of the Law Revision Counsel. 26 USC 1001 – Determination of Amount of and Recognition of Gain or Loss Subtract adjusted basis from amount realized. That’s your gain.
Inherited Property: Stepped-Up Basis
When you inherit, your basis is the fair market value on the date of the decedent’s death, not what they originally paid.10Office of the Law Revision Counsel. 26 US Code 1014 – Basis of Property Acquired from a Decedent If a parent bought stock for $10,000 in 1990 that was worth $200,000 at death, your basis is $200,000. Sell for $205,000 and the taxable gain is $5,000. Decades of unrealized appreciation drop out of the tax base.
Gifted Property: Carryover Basis
Gifts carry over the donor’s original basis.11Office of the Law Revision Counsel. 26 US Code 1015 – Basis of Property Acquired by Gifts and Transfers in Trust Same stock gifted (rather than inherited) at $200,000 keeps its $10,000 basis in your hands. Sell at $205,000 and you owe tax on a $195,000 gain. If the asset’s market value at the time of the gift was below the donor’s basis, you use the lower value when calculating a loss. Any gift tax the donor paid can increase your basis, but not above market value at the time of the gift.
Using Losses to Reduce the Bill
Capital losses offset gains dollar for dollar. A $20,000 gain paired with a $12,000 loss in the same year leaves $8,000 to tax. Short-term losses net against short-term gains and long-term against long-term first, then the two categories combine.
If losses exceed gains, you can deduct up to $3,000 of the excess against ordinary income ($1,500 married filing separately).12Office of the Law Revision Counsel. 26 USC 1211 – Limitation on Capital Losses Anything left over carries forward indefinitely.13IRS.gov. 2025 Instructions for Schedule D (Form 1040) – Capital Gains and Losses A large loss in one year can trim tax bills for years afterward.
One trap: the wash sale rule. Sell a security at a loss and repurchase a substantially identical one within 30 days before or after, and the loss is disallowed for that year.14eCFR. 26 CFR 1.1091-1 – Losses from Wash Sales of Stock or Securities The disallowed amount shifts into the basis of the replacement shares, so the benefit is deferred rather than lost. Buying a put option on the same security also triggers the rule. Wait the full 30 days if you’re harvesting losses at year-end.
Ways to Defer or Exclude the Gain
Several statutory provisions let you postpone or eliminate long-term capital gains tax entirely.
Selling Your Home
You can exclude up to $250,000 of gain on the sale of a primary residence, or $500,000 if married filing jointly.15Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain from Sale of Principal Residence You need to have owned the home and used it as your primary residence for at least two of the five years before the sale. The exclusion is available repeatedly across a lifetime, but not more than once every two years. Many homeowners never pay any capital gains tax on a home sale because of this rule.
Like-Kind Exchanges for Investment Real Estate
Sell investment or business real estate and roll the proceeds into another qualifying property, and the entire gain can be deferred through a Section 1031 exchange. Since the Tax Cuts and Jobs Act, only real property qualifies; vehicles, equipment, and other personal property don’t.16Internal Revenue Service. Like-Kind Exchanges – Real Estate Tax Tips You must identify a replacement property within 45 days of the sale and close within 180 days.17Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment Properties held primarily for resale (house flips) don’t qualify, and neither does your personal residence.
Qualified Small Business Stock
Hold stock in a qualifying domestic C corporation with gross assets under $50 million at issuance for more than five years and you may exclude 100% of the gain from federal tax. The full exclusion applies to stock acquired after September 27, 2010.18Office of the Law Revision Counsel. 26 US Code 1202 – Partial Exclusion for Gain from Certain Small Business Stock The exclusion is capped per issuer at the greater of $10 million or ten times your basis in the stock. This provision mostly matters for startup founders and early employees, and the qualifying-business rules are detailed.
Paying and Reporting
A large gain mid-year often creates a tax bill your withholding won’t cover. If you’ll owe at least $1,000 more than withholding and credits, and your withholding won’t clear the safe harbor, you owe estimated tax during the year.19Internal Revenue Service. Large Gains, Lump Sum Distributions, Etc. The safe harbor: total payments equal at least 90% of the current year’s tax or 100% of last year’s, whichever is smaller. Prior-year adjusted gross income above $150,000 raises the second figure to 110%. If the gain hit in a single quarter, you can annualize income and pay more for that quarter rather than spreading it evenly.
Federal rates aren’t the whole picture. Most states tax capital gains as ordinary income, and state rates run from 0% in no-income-tax states to over 13% at the top end. A handful of states offer preferential rates or partial exclusions for long-term gains. Factor state tax in when planning any significant sale.
Report each sale on Form 8949, listing description, acquisition date, sale date, proceeds, and basis. Totals flow to Schedule D of Form 1040.20Internal Revenue Service. Instructions for Form 8949 (2025) If your broker reported the sale on a 1099-B with basis reported correctly to the IRS, you may be able to skip Form 8949 for those transactions and enter summary totals directly on Schedule D.