Short-Term vs Long-Term Capital Gains
The biggest factor in your capital gains tax is the holding period. Assets held for more than one year qualify for preferential long-term rates (0%, 15%, or 20%). Assets held one year or less are taxed as ordinary income — the same rate as your wages.
2026 Long-Term Capital Gains Brackets
For most middle-class investors, the long-term capital gains rate is 15%. The 0% rate applies to lower-income taxpayers (under ~$47,025 single), and the 20% rate only kicks in for very high earners.
Tax-Loss Harvesting
Capital losses can be used to offset capital gains, reducing your tax bill. If losses exceed gains, up to $3,000 can offset ordinary income per year. This strategy — called tax-loss harvesting — is most effective at year-end when you review your portfolio.
Special Rules for Real Estate
Primary residence exclusion: up to $250,000 of gain (single) or $500,000 (married) is tax-free if you lived in the home for 2 of the past 5 years. Investment property does not qualify and may also trigger depreciation recapture at 25%.
Frequently Asked Questions
Capital gains tax is levied on profit from selling an asset (stocks, real estate, crypto, collectibles). The gain = sale price − purchase price. Short-term gains (held under 1 year) are taxed as ordinary income. Long-term gains (held 1+ years) get preferential 0%, 15%, or 20% rates.
2026 long-term rates: 0% for taxable income up to $47,025 (single) / $94,050 (married filing jointly). 15% for income $47,026–$518,900 (single) / $94,051–$583,750 (married). 20% for income above those thresholds. Most middle-class investors pay 15%.
Short-term capital gains (assets held under 1 year) are taxed as ordinary income at your regular federal income tax rate — the same rate as your wages. Rates range from 10% to 37% depending on total taxable income.
Yes — the IRS treats cryptocurrency as property, not currency. Buying and selling crypto triggers capital gains or losses just like stocks. Crypto held under 1 year = short-term rates. Held 1+ years = long-term rates. Each trade is a taxable event, including crypto-to-crypto trades.
Real estate long-term gains are taxed at 0%, 15%, or 20%. Primary residences get a special exclusion: up to $250,000 of gain (single) or $500,000 (married) is tax-free if you lived in the home 2 of the past 5 years. Investment/rental property does not qualify for this exclusion and may also be subject to depreciation recapture.
High earners pay an additional 3.8% NIIT on investment income (including capital gains). It applies if your modified AGI exceeds $200,000 (single) or $250,000 (married). So the effective top rate on long-term capital gains can be 23.8% (20% + 3.8%) federally.
Yes — capital losses offset capital gains dollar-for-dollar. If you have $10,000 in gains and $4,000 in losses, you owe tax on only $6,000. Excess losses (over gains) can offset up to $3,000 of ordinary income per year. Remaining losses carry forward to future years.
Most states tax capital gains as ordinary income with rates from 0% (no income tax states) to 13.3% (California). A few states have preferential rates or exemptions. Our calculator shows federal tax only — add your state rate for the full picture.