Capital gains are profits from selling assets -- stocks, bonds, real estate, cryptocurrency, collectibles. The tax rate depends on how long you held the asset before selling. This single factor (holding period) can mean the difference between paying your top marginal income tax rate and paying 0%. Understanding these rules is fundamental to investment tax planning.
Short-Term vs. Long-Term Capital Gains
If you sell an asset you held for one year or less, the gain is short-term and taxed as ordinary income -- at your marginal rate, which can be as high as 37%. If you held the asset for more than one year, the gain is long-term and taxed at preferential rates of 0%, 15%, or 20%.
The holding period is calculated from the day after you acquire the asset to the day you sell it. Holding for exactly 366 days (not 365) qualifies for long-term treatment.
2026 Long-Term Capital Gains Tax Rates
| Rate | Single Filers | Married Filing Jointly |
|---|---|---|
| 0% | Up to $48,350 | Up to $96,700 |
| 15% | $48,351 to $533,400 | $96,701 to $600,050 |
| 20% | Over $533,400 | Over $600,050 |
These thresholds apply to taxable income (including the capital gain itself). A single filer with $40,000 in ordinary taxable income and $20,000 in long-term capital gains: the first $8,350 of gains fits under the $48,350 threshold and is taxed at 0%; the remaining $11,650 is taxed at 15%.
The 0% Rate Opportunity
The 0% long-term capital gains rate is one of the most underused opportunities in tax planning. If your taxable income -- including the capital gain -- stays below $48,350 (single) or $96,700 (married), you pay zero federal tax on long-term gains. This creates opportunities for:
- Retirees in low-income years: Sell appreciated holdings with zero federal tax.
- Career transitions or sabbaticals: Harvest gains during a low-income year.
- Gifting appreciated assets to lower-income family members: A parent in the 20% bracket can gift appreciated stock to an adult child in the 0% bracket, who can sell and pay no federal capital gains tax (subject to kiddie tax rules for minors).
Tax-Loss Harvesting
Capital losses offset capital gains dollar-for-dollar. If you have gains in one position and losses in another, selling the losing position (tax-loss harvesting) reduces your net taxable gain. If losses exceed gains, up to $3,000 of excess losses can offset ordinary income annually. Unused losses carry forward indefinitely.
The wash-sale rule: you cannot immediately repurchase the same or substantially identical security. Wait 31 days or buy a similar but not identical replacement fund to maintain market exposure.
Net Investment Income Tax (NIIT)
Higher earners face an additional 3.8% Net Investment Income Tax on investment income including capital gains, when modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly). This pushes the effective long-term capital gains rate to 18.8% or 23.8% for affected taxpayers.
Special Cases
- Real estate: Home sale exclusion of $250,000 (single) or $500,000 (married) on gains from a primary residence owned and lived in for 2 of the last 5 years.
- Collectibles and certain assets: Taxed at a maximum 28% long-term rate (not the standard 20%).
- Cryptocurrency: Treated as property, not currency. Every sale, exchange, or use is a taxable event subject to capital gains rules.
Use our Capital Gains Tax Calculator to estimate your tax on any asset sale, and our Capital Gains Tax Guide for a deeper reference.
Real-World Capital Gains Tax Scenarios for 2026
Understanding the rules for capital gains tax is one thing — seeing how they interact with your specific situation is another. Here's how 2026 capital gains taxes work across common investor scenarios.
Scenario 1: The 0% Rate in Action
A married couple filing jointly has $60,000 in taxable income (after the standard deduction) and sells appreciated stock with a $30,000 long-term gain. The 0% long-term capital gains rate applies for married filers with combined taxable income (including the gain) up to $96,700. Their combined income of $90,000 stays within the 0% threshold — they owe zero federal capital gains tax on the $30,000 gain. This makes intentional gain harvesting in low-income years a legitimate tax strategy worth planning around.
Scenario 2: Cryptocurrency Sale
An investor bought $15,000 of Bitcoin in 2022 and sold it in 2026 for $42,000 — a $27,000 gain. Because it was held more than a year, it qualifies for long-term rates. If this investor is a single filer with $80,000 in ordinary income, the gain stacks on top: $107,000 combined. The entire $27,000 gain is taxed at 15%. Federal capital gains tax owed: $4,050. State taxes apply separately depending on the investor's home state.
The Net Investment Income Tax (NIIT) Trigger
If your Modified AGI exceeds $200,000 (single) or $250,000 (married), an additional 3.8% NIIT applies to the lesser of your net investment income or the amount of income over the threshold. High earners effectively pay 18.8% (15% + 3.8%) or 23.8% (20% + 3.8%) on long-term capital gains — still below the top ordinary income rate of 37%, but meaningfully higher than the base rates suggest. Planning around the NIIT threshold is worthwhile for those near these income levels.
Tax-Loss Harvesting to Offset Gains
Capital losses offset gains dollar-for-dollar. If you have a $27,000 gain from one sale but a $10,000 loss from another position sold in the same year, only $17,000 is subject to capital gains tax. Net capital losses up to $3,000 per year can also offset ordinary income. Any remaining losses carry forward indefinitely to future tax years, maintaining their character as short-term or long-term.
Use our capital gains tax calculator to model your specific scenario, and see our 2026 capital gains rate guide for the complete income thresholds at each rate.