How capital gains are taxed
When you sell stocks, funds, crypto or property for more than you paid, the profit is a capital gain. How it is taxed depends on how long you held the asset:
- Long-term (held more than one year): taxed at 0%, 15% or 20%, depending on your total taxable income.
- Short-term (one year or less): taxed as ordinary income, at the regular brackets from 10% to 37%.
The gain is stacked on top of your other taxable income, so the rate it pays depends on where your income already sits.
2026 long-term capital gains brackets
| Rate | Single | Married filing jointly | Head of household |
|---|---|---|---|
| 0% | up to $49,450 | up to $98,900 | up to $66,200 |
| 15% | to $545,500 | to $613,700 | to $579,600 |
| 20% | above | above | above |
These thresholds apply to taxable income including the gain. On top of them, the net investment income tax adds 3.8% on investment income above $200,000 of modified adjusted gross income ($250,000 married filing jointly). Those thresholds are not indexed for inflation.
Worked example: a $20,000 gain
A single investor has $60,000 of taxable income and sells shares held for three years at a $20,000 gain.
- The 0% bracket ends at $49,450, below the investor’s other income, so the whole gain falls in the 15% bracket.
- Federal tax: 15% × 20,000 = $3,000.
- Income including the gain stays far below $200,000, so there is no net investment income tax.
- Had the shares been held for less than a year, the gain would be taxed at the 22% ordinary rate: $4,400, or $1,400 more.
Tax on larger gains (same investor, long-term)
| Gain | Federal tax | With NIIT | Effective rate |
|---|---|---|---|
| $10,000 | $1,500 | $1,500 | 15.0% |
| $50,000 | $7,500 | $7,500 | 15.0% |
| $100,000 | $15,000 | $15,000 | 15.0% |
| $250,000 | $37,500 | $42,292 | 16.9% |
Ways to reduce the tax
- Hold for more than a year before selling when you can.
- Harvest losses. Losses offset gains, and up to $3,000 of net losses a year can offset ordinary income, with the rest carried forward. Watch the wash-sale rule for securities repurchased within 30 days.
- Use the 0% bracket. In a low-income year, such as early retirement, you may realize long-term gains tax-free.
- Sell your home under the exclusion. Up to $250,000 of gain ($500,000 married) on a main home is excluded if you owned and lived in it for two of the last five years.
- Donate appreciated shares instead of cash to deduct their value without paying tax on the gain.
Limits of this estimate
Collectibles such as art and gold are taxed at up to 28%, and unrecaptured depreciation on real estate at up to 25%. States tax gains too, most at their regular income tax rates. Enter your state rate to include it.