# Capital gains tax: rates, rules and worked examples

Source: https://taxbracketsdesk.com/capital-gains
Publisher: Tax Brackets Desk (taxbracketsdesk.com), independent editorial site
Topic: Capital Gains and Investment Tax
Last updated: 2026-10-20

> Capital gains tax is the federal tax on profit from selling an asset such as stock, a fund, crypto or real estate. For 2026, gains on assets held more than one year are taxed at 0%, 15% or 20% depending on taxable income, while gains on assets held one year or less are taxed at ordinary rates from 10% to 37% (IRS Tax Topic 409; Rev. Proc. 2025-32).

## Key facts

- Long-term holding period: More than one year
- 2026 long-term rates: 0%, 15% or 20%
- 2026 0% rate ceiling: $49,450 single; $98,900 joint; $66,200 head of household
- Net capital loss deduction: $3,000 a year ($1,500 married filing separately)
- Home sale exclusion: Up to $250,000 of gain ($500,000 joint)
- Net investment income tax: 3.8% above $200,000 MAGI single, $250,000 joint

## What is capital gains tax?

Capital gains tax is the income tax you owe on the profit when you sell a capital asset for more than your adjusted basis. Your basis is usually what you paid, plus purchase fees and certain improvements. The profit is the capital gain; a sale for less than basis is a capital loss (IRS Tax Topic 409).

Almost everything you own for personal use or investment counts as a capital asset: shares, bonds, mutual funds, ETFs, crypto, a home, land, a car, art and coins. You only owe tax when you sell or otherwise dispose of the asset. A stock that doubles in value but stays in your account is an unrealized gain and is not taxed yet.

The rate you pay depends on two things: how long you held the asset and your taxable income for the year of the sale. This hub covers the whole picture and links out to a detailed page for each piece.

## What is the difference between short-term and long-term capital gains?

The dividing line is one year. An asset held more than one year produces a long-term gain, taxed at the lower 0%, 15% or 20% rates. An asset held one year or less produces a short-term gain, taxed at the same rates as wages (IRS Tax Topic 409).

The IRS counts the holding period from the day after you acquired the asset up to and including the day you sold it. Shares bought on March 10, 2025 must be sold on March 11, 2026 or later to be long-term. Selling on March 10, 2026 is exactly one year and still short-term.

Two exceptions change the clock. Inherited property is treated as long-term no matter how briefly you owned it, and property received as a gift generally carries over the donor's holding period (IRS Publication 550). The details sit on the [long-term capital gains tax](https://taxbracketsdesk.com/capital-gains/long-term-capital-gains-tax) and [short-term capital gains tax](https://taxbracketsdesk.com/capital-gains/short-term-capital-gains-tax) pages.

## Capital gains tax brackets for 2026

For tax year 2026, returns filed in the 2027 season, the long-term capital gains tax brackets are set by taxable income and filing status. The thresholds below come from Rev. Proc. 2025-32, the IRS inflation adjustment notice released October 9, 2025.

| Filing status | 0% rate | 15% rate | 20% rate |
| --- | --- | --- | --- |
| Single | Up to $49,450 | $49,451 to $545,500 | Over $545,500 |
| Married filing jointly | Up to $98,900 | $98,901 to $613,700 | Over $613,700 |
| Head of household | Up to $66,200 | $66,201 to $579,600 | Over $579,600 |
| Married filing separately | Up to $49,450 | $49,451 to $306,850 | Over $306,850 |

2026 long-term capital gains tax brackets by taxable income

These thresholds are based on your total taxable income, including wages and the gain itself. Your ordinary income fills the bottom of the stack first, and the gain sits on top. That is why part of a gain can be taxed at 0% and the rest at 15%. The [2026 capital gains tax rate](https://taxbracketsdesk.com/capital-gains/capital-gains-tax-rates-2026) page compares 2025 and 2026 thresholds and explains when 2027 figures will appear.

> **2027 thresholds:** The 2027 capital gains thresholds are not yet announced as of September 18, 2026. The IRS usually publishes next-year figures in October or November.

## How much is capital gains tax? Three worked examples

Each example uses 2026 figures and assumes the gain is the only investment income. Taxable income means income after the standard or itemized deduction.

### Example 1: a gain taxed at 0%

A single filer has $30,000 of taxable income from wages and sells an index fund held three years for a $15,000 long-term gain. Total taxable income is $45,000, which is under the $49,450 ceiling for the 0% rate. The federal tax on the gain is $0. Tax on the wages is figured normally from the regular brackets.

### Example 2: a gain split between 0% and 15%

A married couple filing jointly has $90,000 of taxable wage income and a $30,000 long-term gain, for $120,000 of taxable income. The first $8,900 of gain fills the room left under $98,900 and is taxed at 0%. The remaining $21,100 is taxed at 15%, or $3,165.

### Example 3: the same gain held too briefly

If the couple in Example 2 had sold after 11 months, the whole $30,000 would be short-term and taxed at their ordinary rates. Stacked on $90,000 of wages, the first $10,800 falls in the 12% bracket (up to $100,800) and the other $19,200 in the 22% bracket. The tax is $1,296 plus $4,224, or $5,520, instead of $3,165.

## Other investment taxes that can apply

The 0%, 15% and 20% rates are not the whole story for larger gains or special assets. Three other rules can raise your investment tax.

- **Net investment income tax (NIIT):** 3.8% on the lesser of net investment income or modified adjusted gross income above $200,000 (single or head of household), $250,000 (joint) or $125,000 (separate). These thresholds are not indexed for inflation. See the [net investment income tax](https://taxbracketsdesk.com/capital-gains/net-investment-income-tax) page.
- **Special maximum rates:** gains on collectibles such as coins and art, and the taxable part of qualified small business stock gain, are taxed at up to 28%. Unrecaptured section 1250 gain, the depreciation portion of a real estate gain, is taxed at up to 25%.
- **State income tax:** most states tax capital gains as ordinary income. A handful of states have no income tax at all.

Qualified dividends use the same 0%, 15% and 20% brackets as long-term gains and share the same stack. The [qualified dividends tax rate](https://taxbracketsdesk.com/capital-gains/qualified-dividends-tax-rate) page explains which dividends qualify.

## How capital losses reduce your tax

Capital losses offset capital gains first, dollar for dollar. If losses exceed gains, you can deduct up to $3,000 of the net loss against other income such as wages ($1,500 if married filing separately). Any loss above that carries forward to future years with no time limit (IRS Tax Topic 409).

For example, an investor with a $4,000 gain on one stock and a $9,000 loss on another has a $5,000 net loss. She deducts $3,000 this year and carries $2,000 into 2027. Losses on personal-use property, such as selling your own car or furniture below cost, are not deductible.

> **Wash sale rule:** If you sell stock at a loss and buy substantially identical stock within 30 days before or after the sale, the loss is disallowed for now and added to the basis of the new shares (IRS Publication 550).

## Do I pay capital gains on a home sale?

Often not. If you owned and lived in the home as your main home for at least two of the five years before the sale, you can exclude up to $250,000 of gain, or $500,000 on a joint return (IRS Tax Topic 701). Only gain above the exclusion is taxed, at the long-term rates if you held the home more than a year.

A loss on your own home is not deductible. The ownership and use tests, the partial exclusion for job moves and health reasons, and a full basis worksheet are on the [capital gains on home sale](https://taxbracketsdesk.com/capital-gains/capital-gains-home-sale) page.

## Gifts, inheritances and capital gains

Giving an appreciated asset away does not trigger capital gains tax for the giver. The recipient generally takes over your holding period, so when they sell, the gain is measured under the gift basis rules. Gifts up to $19,000 per recipient in 2026 need no gift tax return; the [gift tax limit](https://taxbracketsdesk.com/capital-gains/gift-tax-limit) page covers larger gifts.

Inherited assets are always long-term, even if the heir sells the week after receiving them. The federal estate tax exclusion is $15,000,000 per person for 2026 (Rev. Proc. 2025-32), explained on the [estate tax exemption](https://taxbracketsdesk.com/capital-gains/estate-tax-exemption) page.

## How do I avoid capital gains tax legally?

You cannot erase a gain, but these legal steps can lower or delay the tax:

1. Hold more than one year before selling, so the gain gets the 0%, 15% or 20% rate instead of your ordinary rate.
2. Time sales for a low-income year, such as a gap between jobs or early retirement, when more of the gain fits under the 0% ceiling.
3. Sell losing positions in the same year to offset gains, while respecting the 30-day wash sale window.
4. Invest through a 401(k) or IRA, where trades inside the account are not taxed each year.
5. Meet the two-out-of-five-year test before selling your main home to use the $250,000 or $500,000 exclusion.
6. Spread a large sale over two tax years if the buyer and deal allow it, to keep each year under a threshold.

## How to report capital gains on your return

Each sale goes on Form 8949, Sales and Other Dispositions of Capital Assets, and the totals move to Schedule D (Form 1040). Your broker sends Form 1099-B for securities, crypto platforms send Form 1099-DA, and a home sale closing agent may send Form 1099-S.

For crypto sold in 2026, brokers must report gross proceeds and, for covered assets bought after 2025 and held in the same account, basis on [Form 1099-DA](https://taxbracketsdesk.com/capital-gains/form-1099-da), a change from 2025 when only proceeds were required (IRS digital assets page). For crypto bought earlier or moved in from another wallet, you still supply the basis yourself. If a large gain means you will owe $1,000 or more when you file, you may need to make quarterly estimated payments during the year (IRS Publication 505).

## Common questions

### What is the capital gains tax rate for most people?

Most people with long-term gains pay 15%. For 2026 that rate covers single filers with taxable income from $49,451 to $545,500 and joint filers from $98,901 to $613,700. Short-term gains are taxed at your ordinary bracket instead.

### Does capital gains count as income?

Yes. Capital gains are part of your gross income and adjusted gross income, which can affect credits, deductions and Medicare premiums. They are simply taxed at different rates when long-term.

### Do I pay capital gains tax if I reinvest the money?

Yes. Selling and buying something else in a regular brokerage account is a taxable sale even if the cash never leaves the account. Only trades inside tax-advantaged accounts such as IRAs and 401(k)s are sheltered.

### At what age do you not pay capital gains tax?

There is no age exemption from capital gains tax. Retirees often pay 0% simply because their taxable income falls under the 0% ceiling, such as $98,900 for a joint return in 2026.

### Is capital gains tax paid when you sell or at the end of the year?

It is owed for the tax year of the sale and settled on that year's return. If the tax is large, the IRS expects estimated payments during the year to avoid an underpayment penalty.

### Do I have to report a capital gain if I did not get a 1099?

Yes. All taxable gains must be reported on Form 8949 and Schedule D whether or not you received a Form 1099-B, 1099-DA or 1099-S.

## Sources

- [Tax Topic 409, Capital gains and losses](https://www.irs.gov/taxtopics/tc409)
- [Rev. Proc. 2025-32 (tax year 2026 inflation adjustments)](https://www.irs.gov/pub/irs-drop/rp-25-32.pdf)
- [Tax Topic 701, Sale of your home](https://www.irs.gov/taxtopics/tc701)
- [Publication 550, Investment Income and Expenses](https://www.irs.gov/publications/p550)
- [Digital assets](https://www.irs.gov/filing/digital-assets)
- [Publication 505, Tax Withholding and Estimated Tax](https://www.irs.gov/pub/irs-pdf/p505.pdf)