Capital Gains Tax 2026: Rates, Brackets, and What Changed This Year

Short-Term vs. Long-Term: The One Rule That Matters Most

The IRS draws a single bright line. Hold an asset for more than one year before selling, and you get preferential tax rates. Sell before that one-year mark, and you pay ordinary income tax rates — the same rates you pay on your salary.

That's it. That's the whole framework. Everything else is detail.

Short-term capital gains (held ≤ 1 year): taxed at 10%–37%, depending on your total taxable income. Same brackets as wages. No special treatment.

Long-term capital gains (held > 1 year): taxed at 0%, 15%, or 20%. Much lower. This is why financial advisors constantly tell you not to sell things early. The tax difference between holding for 11 months and 13 months can be enormous.

2026 Long-Term Capital Gains Brackets

These thresholds are inflation-adjusted annually. The 2026 numbers come from IRS Revenue Procedure 2025-19.

A quick but common misconception: these brackets are based on your taxable income, not just your capital gains. Your salary, business income, and other ordinary income count toward the threshold. So if you earn $90,000 in salary and sell $20,000 in stock gains, your total taxable income is what determines your rate — not the $20,000 alone.

The 3.8% Surtax Nobody Remembers

On top of the 0%/15%/20% rates, there's the Net Investment Income Tax (NIIT). It's an additional 3.8% on investment income — capital gains, dividends, interest, rental income — for filers above certain income thresholds:

• Single: AGI above $200,000
• Married filing jointly: AGI above $250,000
• Head of household: AGI above $200,000

These thresholds are not inflation-adjusted. They've been $200,000/$250,000 since the NIIT was created in 2013. Every year, more filers get caught by it as incomes rise and the thresholds stay flat.

With the NIIT, the effective maximum federal capital gains rate is 20% + 3.8% = 23.8%. Add state taxes on top and you can easily hit 30%+ in California or New York.

What Changed for 2026

Honestly? Not much. And that's the story.

The TCJA expiration didn't directly change long-term capital gains rates — those have been 0%/15%/20% since 2013. What the TCJA did change was the bracket thresholds and the interaction with ordinary income brackets. The One Big Beautiful Bill preserved those relationships.

The 2026 changes are just inflation adjustments:

• Bracket thresholds went up roughly 2.5% from 2025
• The 0% rate covers about $1,100 more in income for single filers than last year
• NIIT thresholds remain stuck at $200k/$250k (still not indexed)

If you heard panic about capital gains rates changing in 2026 — that was about the sunset scenario. If the TCJA had fully expired without the OBBB, the capital gains thresholds would have been realigned with the old (higher) ordinary income brackets, and some filers would have shifted from the 15% to the 20% tier. The OBBB prevented that.

Real Examples: What You'd Actually Pay

Look at the third and fourth rows. Same $30,000 gain. Holding 6 months vs 14 months. The difference is $2,100 in tax. That's the cost of impatience.

And the first row — $0 in tax on a $10,000 gain. A lot of people don't realize the 0% bracket exists. If your total taxable income is under $48,350 (single), your long-term gains are literally tax-free at the federal level. Retirees, part-time workers, and people in transition years can use this strategically.

State Capital Gains Taxes: The Other Bite

Federal rates are only part of the picture. Most states tax capital gains as ordinary income. A few bright spots:

• No state capital gains tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming
• Highest state rates on gains: California (13.3%), New York (10.9%), New Jersey (10.75%), Oregon (9.9%), Minnesota (9.85%)

If you're selling $500,000 in appreciated stock in California, your combined federal + state rate is 23.8% + 13.3% = 37.1%. That same sale in Florida? Just 23.8%. The $66,500 difference is significant enough that some people time their moves.

See how all 50 states compare with our Best Places explorer.

How the US Compares Globally

The US system of preferential long-term rates is fairly generous by international standards. Here's how the countries we track handle investment gains.

The US 0% rate for lower earners is genuinely unusual. Few countries offer that. But at the high end, Germany's flat 26.375% and France's flat 30% are simpler — and not dramatically different from the US's 23.8% + state. The real outliers are the UAE and Singapore, where investment gains just aren't taxed. That's one reason they've become magnets for investors and tech workers.

Curious about how your total tax burden compares across countries? Try our international comparison tool.

Strategies That Actually Reduce Your Capital Gains Tax

Let's skip the generic advice and focus on what moves the needle.

1. Hold for over a year. Obvious, but the most impactful single decision. The rate difference between short-term (up to 37%) and long-term (0%–20%) is enormous. If you're sitting on a gain and you're close to the one-year mark, wait.

2. Harvest your losses. Sold some winners? Sell some losers too. Capital losses offset capital gains dollar for dollar. If your losses exceed your gains, you can deduct up to $3,000 of net losses against ordinary income per year, and carry the rest forward. Just respect the wash sale rule: you can't repurchase a "substantially identical" security within 30 days before or after the sale. The IRS will disallow the loss if you do.

3. Use the 0% bracket. If you're in a low-income year — between jobs, newly retired, taking a sabbatical — you might have taxable income under $48,350. That's a window to sell appreciated assets and pay zero federal tax on the gains. This is especially powerful for retirees who can control their income sources.

4. Donate appreciated assets. Instead of selling stock and donating cash, donate the stock directly to a qualified charity. You get a deduction for the full fair market value, and neither you nor the charity pays capital gains tax on the appreciation. This only works if you itemize deductions.

5. Use tax-advantaged accounts. Gains inside a 401(k), traditional IRA, or Roth IRA aren't taxed as they grow. In a Roth, they're never taxed. If you're actively trading, doing it inside a tax-advantaged account eliminates capital gains entirely. This is obvious — but a surprising number of people day-trade in taxable accounts while their retirement accounts sit in index funds. Think about it.

Crypto: The IRS Is Paying Attention Now

One more thing. If you're trading cryptocurrency, the IRS treats it as property — same capital gains rules apply. Sell Bitcoin after holding it for two years? Long-term rate. Swap ETH for a smaller altcoin after three months? Short-term rate (and yes, crypto-to-crypto trades are taxable events).

Starting in 2026, exchanges are required to issue Form 1099-DA reporting your crypto transactions. The era of "the IRS doesn't know about my crypto" is over. Report everything. The penalties for not reporting are far worse than the tax.

The Bottom Line

Capital gains tax in 2026 isn't dramatically different from 2025. The brackets shifted up for inflation, but the structure — 0%/15%/20% for long-term, ordinary rates for short-term, 3.8% NIIT above $200k — is unchanged. The biggest thing you can do is hold assets over a year, harvest losses to offset gains, and be strategic about which year you realize income.

Run your numbers through the 2026 US tax calculator to see where your ordinary income puts you, then layer your capital gains on top. The effective rate is always lower than the headline rate suggests.

Sources: IRS Rev. Proc. 2025-19 (2026 inflation-adjusted thresholds), IRC Section 1(h) (capital gains rates), IRC Section 1411 (Net Investment Income Tax), IRS Notice 2024-56 (Form 1099-DA crypto reporting), Tax Foundation 2026 capital gains analysis. All ordinary income calculations via FiscalFold using official IRS parameters.