Capital gains are taxed differently depending on how long you owned the asset. A gain on something held for one year or less is short-term and taxed at ordinary income rates, while a gain on something held more than one year is long-term and taxed at 0%, 15% or 20% for most assets. For tax year 2026, a single filer's 0% rate applies up to $49,450 of taxable income, and the 20% rate starts above $545,500.
Key takeaways
- Holding period decides the rate type: more than one year is long-term, one year or less is short-term and taxed like wages.
- Long-term rates depend on total taxable income and filing status, and the gain is stacked on top of your other taxable income, so one gain can be taxed at two different rates.
- Collectibles can be taxed up to 28% and unrecaptured gain on real property up to 25%, and a 3.8% surtax can apply above $200,000 (single) or $250,000 (joint) of modified adjusted gross income.
- Net capital losses offset gains first, then up to $3,000 a year ($1,500 if married filing separately) of other income, with the rest carried forward.
- A main-home gain can be excluded up to $250,000 ($500,000 on a joint return) if the ownership and use tests are met.
Short-term versus long-term gains
A gain is the sale price minus your basis (generally what you paid, adjusted for costs and certain events). The IRS counts the holding period from the day after you acquire the asset through the day you dispose of it. Held more than one year, the gain or loss is long-term; one year or less, it is short-term, according to IRS Topic No. 409. For stocks and other securities traded on an exchange, IRS Publication 550 says the holding period runs from the day after the trade date of the purchase to the trade date of the sale; the later settlement date does not change it. Some assets follow their own rules: inherited property is treated as long-term no matter how briefly you held it, and gifts and a few other cases are covered in Publication 544.
Net short-term gains are taxed as ordinary income at your regular graduated rates. Most net long-term gain is taxed at no more than 15%, and some is taxed at 0%. Higher earners reach 20%. Most transactions go on Form 8949 and then Schedule D of Form 1040.
2026 long-term rate thresholds
The thresholds below are for tax year 2026 (income earned in 2026 and reported on the return filed in 2027). They come from section 3.03 of Rev. Proc. 2025-32. IRS Topic No. 409 still shows the tax year 2025 figures at the time of writing (for a single filer, 0% up to $48,350 and 15% up to $533,400), so check which year a source describes. The thresholds apply to taxable income, which is income after the standard or itemized deduction.
| Filing status (2026) | 0% up to | 15% up to | 20% above |
|---|---|---|---|
| Single | $49,450 | $545,500 | $545,500 |
| Married filing jointly or surviving spouse | $98,900 | $613,700 | $613,700 |
| Head of household | $66,200 | $579,600 | $579,600 |
| Married filing separately | $49,450 | $306,850 | $306,850 |
How a gain stacks on your income
Long-term gains are layered on top of ordinary taxable income. Ordinary income fills the lower part of the range first, so the room left under a threshold determines how much of the gain gets each rate. This is why a single sale can be taxed partly at 0% and partly at 15%. Qualified dividends get the same 0%, 15% or 20% rates as net capital gain under Publication 550, so they use up the same room under each threshold.
Illustrative example (tax year 2026, single filer, standard deduction): wages of $55,000 and a $20,000 gain on shares. The 2026 standard deduction for a single filer is $16,100 under section 3.14 of Rev. Proc. 2025-32, and the 2026 single brackets are 10% to $12,400, 12% to $50,400 and 22% to $105,700. The figures below ignore credits and other items.
Ordinary taxable income = 55,000 - 16,100 = 38,900
Tax on ordinary income = 12,400 x 10% + (38,900 - 12,400) x 12% = 4,420
Room under 0% limit = 49,450 - 38,900 = 10,550
Long-term gain taxed 0% = 10,550
Long-term gain taxed 15% = 20,000 - 10,550 = 9,450 -> 1,417.50
Total tax, long-term = 4,420 + 1,417.50 = 5,837.50
- Long-term case: the $20,000 gain adds $1,417.50 of tax, an average of about 7.1% of the gain.
- Short-term case: the same $20,000 taxed as ordinary income adds $3,250 (11,500 at 12% plus 8,500 at 22%), bringing total tax to $7,670.
- Difference: $3,250 minus $1,417.50 is $1,832.50 less tax from holding period alone in this example.
The gap grows or shrinks with income. With wages of $90,000 (ordinary taxable income $73,900), the same $20,000 gain is entirely in the 15% zone and adds $3,000 if long-term versus $4,400 if short-term, a difference of $1,400. The examples are hypothetical and are not a prediction of anyone's return.
The 3.8% net investment income tax
The net investment income tax (NIIT) is a separate 3.8% tax on the lesser of net investment income or the amount by which modified adjusted gross income (MAGI) exceeds a threshold, per IRS Topic No. 559. The thresholds are $250,000 for married filing jointly or a qualifying surviving spouse, $125,000 for married filing separately, and $200,000 for single or head of household. They are written into 26 U.S.C. 1411, which contains no inflation adjustment, so they are not indexed and are the same for 2026 as in earlier years.
Net gains from selling stocks, bonds, mutual funds and real estate generally count as net investment income, while wages and the home-sale gain you exclude do not. Illustrative example: a single filer with MAGI of $230,000 that includes a $50,000 gain, and no other investment income, is $30,000 over the threshold, so the NIIT is 3.8% of the lesser amount, $30,000, or $1,140, in addition to the regular tax on the gain.
Special rates and home sales
Topic No. 409 lists exceptions to the 0/15/20 pattern: net gains from collectibles such as coins or art are taxed at a maximum of 28%, and unrecaptured section 1250 gain from real property (generally the part of a gain tied to depreciation claimed on it) at a maximum of 25%. Taxable gain on qualified small business stock under section 1202 has a 28% maximum.
Selling your main home
Under IRS Topic No. 701, you may exclude up to $250,000 of gain on the sale of your main home, or $500,000 on a joint return. You must pass both tests during the five years ending on the sale date: you owned the home at least two years (the ownership test) and lived in it as your main home at least two years (the use test). On a joint return for the larger exclusion, either spouse can meet the ownership test but both must meet the use test. Generally you cannot claim the exclusion if you excluded gain on another home sold within the previous two years. Gain above the limit is taxable, and the sale is reported on Schedule D and Form 8949 if any gain is taxable or you received Form 1099-S. Partial exclusions exist for some situations and are explained in IRS Publication 523.
Losses and the wash sale rule
Capital losses first offset capital gains. If losses exceed gains, you can deduct the lesser of $3,000 ($1,500 if married filing separately) or the net loss against other income each year, and any remainder carries forward to later years, per Topic No. 409. Illustrative example: a $10,000 net loss with no gains gives a $3,000 deduction this year and $7,000 carried forward. Only losses on investment property count: Topic No. 409 states that a loss on personal-use property, such as your home or car, is not deductible.
The wash sale rule limits losses on repurchases. If you sell at a loss and, within 30 days before or after the sale, buy substantially identical stock or securities (or acquire a contract or option to buy them), the loss is disallowed, according to IRS Publication 550. The rule also applies if your spouse or a corporation you control makes the purchase, or if the shares are bought for an IRA or Roth IRA. For a taxable-account repurchase, the disallowed loss is added to the basis of the new shares and the holding period carries over, so the loss is deferred. When the replacement is bought for an IRA, the basis adjustment does not apply, so the disallowed loss is not added to the cost of any shares.
Frequently asked questions
When does the one-year holding period start?
The IRS counts from the day after you acquire the asset through the day you dispose of it. The gain is long-term only if that period is more than one year, so a sale on the one-year anniversary is still short-term. For exchange-traded securities, use the trade dates of the purchase and the sale, not the settlement dates. Check those dates for each lot on your broker statement.
Which year's thresholds apply to a sale in 2026?
The tax year 2026 figures apply to gains realized in calendar 2026, reported on the return filed in 2027. They are the amounts in Rev. Proc. 2025-32. For exchange-traded stock, the trade date sets the year: Publication 550 gives the example of a sale made on December 31 that settles in January, which is reported for the year of the trade. A sale in 2027 will use that year's adjusted amounts.
Does the net investment income tax apply to my wages?
No. Topic No. 559 states that wages, unemployment compensation and income from an active business are not subject to the NIIT. Wages can still raise your MAGI, which determines whether the threshold is exceeded.
Must a home sale be reported if the gain is excluded?
You must report it if you receive Form 1099-S, even when the gain is excludable. You also report it if any part of the gain is taxable. Topic No. 701 explains the reporting on Schedule D and Form 8949.
Can a wash sale happen if my spouse buys the shares?
Yes. Publication 550 says that if you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale. Purchases for an IRA or Roth IRA count as well.
Checklist before you sell
- List each lot with its acquisition date, sale date and basis, and see whether each is past the one-year mark.
- Estimate taxable income for the year, using the standard or itemized deduction, and compare it with your filing status row in the 2026 table.
- Check MAGI against the NIIT threshold for your filing status, and whether a large gain means you need estimated tax payments or more withholding, as Topic No. 409 and Topic No. 559 note.
- Note any collectibles, depreciated real property or main-home sale that follow different rules.
- Total your gains and losses, including any carryover from earlier returns, and check for repurchases within 30 days of a loss sale.
This article is general education about federal tax rules, not tax advice. Thresholds change yearly, and state taxes are separate; a licensed tax professional can apply the rules to your facts.
