A capital gain is the profit a taxpayer makes when they sell or exchange an asset for more than its adjusted basis.
Common capital assets include:
- Stocks and mutual funds
- Real estate
- Cryptocurrency
- Business or investment property
Adjusted basis is generally what the taxpayer paid for the asset, plus improvements and minus depreciation or other adjustments.
2026 Long-Term Capital Gain Tax Rates
Long-term capital gains may qualify for preferential tax rates of 0%, 15%, or 20%, depending on your taxable income and filing status.
| Filing Status | 0% Rate Up To | 15% Rate | 20% Rate Begins At |
|---|---|---|---|
| Single | $49,450 | $49,451-$545,500 | Over $545,500 |
| Married Filing Jointly | $98,900 | $98,901-$613,700 | Over $613,700 |
| Head of Household | $66,200 | $66,201-$579,600 | Over $579,600 |
| Married Filing Separately | $49,450 | $49,451-$306,850 | Over $306,850 |
These thresholds apply to tax year 2026 returns filed in 2027.
Net Investment Income Tax (NIIT)
In addition to the regular capital gain tax rates, some taxpayers may owe the 3.8% Net Investment Income Tax (NIIT).
The NIIT may apply if Modified Adjusted Gross Income (MAGI) exceeds:
- $200,000 for Single and Head of Household filers
- $250,000 for Married Filing Jointly filers
- $125,000 for Married Filing Separately filers
These thresholds are not indexed for inflation and remain unchanged for 2026.
How Capital Gains Are Calculated
Capital Gain Formula:
Capital Gain = Sale Price − Adjusted Basis
- If the result is positive, the taxpayer has a capital gain
- If the result is negative, the taxpayer has a capital loss
Short‑Term vs. Long‑Term Capital Gains
Short‑Term Capital Gain
- Asset held 1 year or less
- Taxed at ordinary income tax rates (same as wages)
Long‑Term Capital Gain
- Asset held more than 1 year
- Taxed at preferential rates:
- 0%
- 15%
- 20%
- The applicable rate depends on the taxpayer’s taxable income and filing status
Holding period begins the day after acquisition and ends on the date of sale.
Example:
You bought stock for $5,000 and sold it for $8,000 after 2 years.
- Adjusted Basis = $5,000
- Sale Price = $8,000
- Capital Gain = $3,000
- Since you held it for more than a year, it’s a long-term capital gain.
Reporting Capital Gains and Losses
Capital gains and losses are reported on:
- Form 8949 (details each sale)
- Schedule D (summarizes total gains and losses)
Net Capital Loss Rules
- Up to $3,000 per year of net capital losses can offset ordinary income
- Any unused losses can be carried forward to future tax years
Tax software calculates netting and carryforwards automatically based on entered information.