Money guide
What will you owe in capital gains tax?
Long-term capital gains rates are bracketed, not flat — and the gain itself decides which bracket it lands in. Here are the bands, the surtax that sits on top, and the holding period that changes everything.
Almost every explanation of capital gains tax says "long-term gains are taxed at 15%". That is the most common rate, and it is not a rule. The rate is bracketed the same way ordinary income is, and the bracket depends on your total taxable income including the gain you are asking about.
The holding period comes first
One year and one day. That is the line.
- Short-term — held one year or less. Taxed as ordinary income, at your marginal rate, which for many people is 22%, 24% or higher.
- Long-term — held more than one year. Taxed at the preferential rates below.
Nothing else in this guide matters as much as that date. For a large gain the difference between selling on day 364 and day 366 is frequently a five-figure sum, and it is entirely within your control.
The long-term brackets
For 2026, the long-term capital gains rate depends on taxable income:
| Rate | Single, taxable income up to | Married filing jointly, up to |
|---|---|---|
| 0% | $49,450 | $98,900 |
| 15% | $545,500 | $613,700 |
| 20% | above that | above that |
Two things follow from this that a flat-rate explanation hides.
There is a 0% band, and it is not small. A single filer with modest taxable income can realize a long-term gain and owe nothing federally on part or all of it. This is the basis of deliberate gain harvesting in low-income years — a gap year, a sabbatical, the years between retiring and claiming Social Security.
The gain stacks on top of your other income. The gain is not taxed in isolation; it is added to your taxable income and the bands are applied to the total. So a large gain can start in the 0% band, cross into 15%, and finish in 20% — all within a single sale. The capital gains calculator applies the bands to the stacked total rather than picking one rate, which is why its answer sometimes differs from a flat-rate estimate.
The surtax on top
Above certain income levels a further 3.8% net investment income tax applies. The formula is specific and worth getting right:
The thresholds are $200,000 for single and head of household filers and $250,000 for married filing jointly. Unlike almost every other figure in the tax code, these are written into the statute and are not adjusted for inflation — they have been the same since the tax took effect, which means more households cross them every year without anything changing in their own circumstances.
Net investment income includes interest, dividends, capital gains, rental and royalty income and non-qualified annuities. It does not include wages, unemployment compensation, Social Security benefits, alimony or most self-employment income.
One useful exclusion: gain on the sale of a main home that is excluded from gross income under Section 121 is also excluded from net investment income. That exclusion is covered in the guide on renting versus buying.
What is actually taxed
Not the sale price — the gain, which is proceeds minus your cost basis. Basis is what you paid plus commissions, plus reinvested dividends you already paid tax on, plus capital improvements for property.
Getting basis wrong is the most common and most expensive error here, and it almost always runs in the direction of overstating the gain. Before computing anything, make sure the basis figure is complete.
Losses offset gains, and net losses can offset up to $3,000 of ordinary income per year, with the remainder carried forward.
State tax
None of the above includes state tax. Most states tax capital gains as ordinary income with no preferential rate at all, which means the state bill can exceed the federal one for someone sitting in the federal 0% band. A few states have no income tax. This varies enough that a national figure is meaningless — check your own.
What to do with this
- Check the holding period before selling anything. It is the largest single lever and it costs nothing to wait.
- Work out the bracket including the gain, not your current bracket.
- Find your true basis. Reinvested dividends and improvements count.
- Check whether you cross a NIIT threshold, and remember the calculation is the lesser of two amounts, not 3.8% of everything.
- Consider harvesting in low-income years if you have appreciated holdings and a year where the 0% band has room in it.
- Add your state. The federal answer is frequently not the whole bill.
Sources: long-term capital gains brackets from IRS Revenue Procedure 2025-32, section 3.03, for taxable years beginning in 2026; net investment income tax rate, formula and thresholds from IRS, net investment income tax. Both read from the same constants the calculator uses.