Long-Term Capital Gains Rates 2026
Long-term capital gains apply to assets held for more than one year. These preferential rates are significantly lower than ordinary income tax rates and are a major tax planning opportunity for self-employed individuals.
| Rate | Single | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 0% | $0 – $48,350 | $0 – $96,700 | $0 – $64,750 |
| 15% | $48,351 – $533,400 | $96,701 – $600,050 | $64,751 – $566,700 |
| 20% | Over $533,400 | Over $600,050 | Over $566,700 |
Key insight: Long-term capital gains rates are based on your taxable income, not just your capital gain amount. If your ordinary income already fills part of a bracket, your capital gains stack on top. The 0% rate is available to single filers with taxable income under $48,350 — a significant planning opportunity for lower-income years.
Short-Term Capital Gains Rates 2026
Short-term capital gains apply to assets held for one year or less. They are taxed as ordinary income at the same rates as your regular income, using the same seven federal income tax brackets:
| Tax Rate | Single | Married Filing Jointly |
|---|---|---|
| 10% | $0 – $12,100 | $0 – $24,200 |
| 12% | $12,101 – $49,150 | $24,201 – $98,300 |
| 22% | $49,151 – $105,225 | $98,301 – $210,450 |
| 24% | $105,226 – $200,700 | $210,451 – $401,400 |
| 32% | $200,701 – $375,000 | $401,401 – $600,000 |
| 35% | $375,001 – $530,000 | $600,001 – $750,000 |
| 37% | Over $530,000 | Over $750,000 |
Since short-term gains are taxed as ordinary income, the difference between holding an asset 364 days vs. 366 days can mean a rate difference of more than 10 percentage points in many cases. This is one of the most powerful simple tax strategies available.
Net Investment Income Tax (NIIT)
In addition to the capital gains rates above, high-income earners may owe the 3.8% Net Investment Income Tax (NIIT), also called the Medicare surtax on investment income. This tax was introduced by the Affordable Care Act.
| Filing Status | MAGI Threshold | NIIT Rate |
|---|---|---|
| Single / Head of Household | MAGI over $200,000 | 3.8% |
| Married Filing Jointly | MAGI over $250,000 | 3.8% |
| Married Filing Separately | MAGI over $125,000 | 3.8% |
NIIT applies to the lesser of: (1) your net investment income, or (2) the amount by which your MAGI exceeds the applicable threshold. Investment income subject to NIIT includes:
- Capital gains (both short-term and long-term)
- Dividends and interest
- Rental income (not from active trade or business)
- Passive activity income
At the maximum long-term capital gains rate, the combined federal rate for high-income earners can reach 23.8% (20% capital gains + 3.8% NIIT) on long-term gains, or as high as 40.8% (37% ordinary income + 3.8% NIIT) on short-term gains.
Capital Gains and Self-Employed Individuals
Self-employed individuals encounter capital gains situations that differ from typical investors. Here are the most common scenarios:
Business Equipment & Vehicles
When you sell depreciated business assets (equipment, vehicles), the gain is subject to depreciation recapture taxed at 25% (Section 1245 property) or as ordinary income. The gain above your original purchase price is taxed as long-term capital gain if held over a year.
Home Office Depreciation Recapture
If you claimed home office deductions using the actual expense method and took depreciation, that depreciation is recaptured and taxed at 25% when you sell your home — even if the overall home sale qualifies for the $250,000/$500,000 exclusion.
Business Goodwill
When selling a business, the portion of the purchase price allocated to goodwill is generally taxed as long-term capital gain if the business was held over a year. This is often the largest and most favorably taxed component of a business sale.
Client Equity & Startup Stock
Equity received as compensation from clients is ordinary income at receipt (fair market value). Subsequent appreciation may qualify for long-term capital gains treatment if held over a year. QSBS (Section 1202) can exclude up to 100% of gains on qualifying small business stock.
Crypto for freelancers: If you receive cryptocurrency as payment for services, it is ordinary income at the fair market value when received. Any subsequent appreciation or depreciation when you sell or spend the crypto is a capital gain or loss — short-term if held under a year, long-term if held longer.
How to Minimize Capital Gains Tax
Hold Assets Over One Year
The most direct strategy. Qualifying for long-term treatment can reduce your rate by 10–20+ percentage points depending on your income level.
Tax-Loss Harvesting
Sell losing investments to offset capital gains. Up to $3,000 of net capital losses can offset ordinary income per year; losses in excess carry forward to future years.
Use Retirement Accounts
Investments inside a Traditional IRA, Roth IRA, or Solo 401(k) grow tax-deferred or tax-free. Capital gains realized inside these accounts are not subject to capital gains tax.
Qualified Opportunity Zones
Investing capital gains in a Qualified Opportunity Zone fund can defer and potentially reduce the original gain, and eliminate future appreciation on the QOZ investment if held 10+ years.
Section 1202 (QSBS)
Founders and early investors in qualifying C-corporations may exclude up to 100% of capital gains on sale if the stock was held over 5 years and the company qualifies. This is one of the most powerful capital gains exclusions in the tax code.
Charitable Giving
Donating appreciated assets (stocks, real estate) directly to charity avoids capital gains tax on the appreciation while generating a charitable deduction for the full fair market value.
Capital Gains Reporting
Capital gains and losses must be reported to the IRS using the following forms:
| Form | Purpose | Who Needs It |
|---|---|---|
| Schedule D | Summary of capital gains and losses; calculates net gain/loss | Anyone with capital gain/loss transactions |
| Form 8949 | Itemized list of individual capital asset transactions | All taxpayers with sales of stocks, real estate, crypto, etc. |
| Form 8960 | Net Investment Income Tax calculation | High earners subject to the 3.8% NIIT |
| Form 4797 | Sales of business property, depreciation recapture | Self-employed individuals selling depreciated business assets |
Cryptocurrency and Digital Assets
The IRS treats cryptocurrency and NFTs as property, not currency. This means:
- Every sale, exchange, or use of crypto to purchase goods/services is a taxable event
- Gains and losses are short-term (held ≤1 year) or long-term (held >1 year)
- Each transaction must be reported on Form 8949
- Mining income is ordinary income at fair market value when received
- Staking rewards are generally treated as ordinary income when received
The IRS now asks on Form 1040: “At any time during 2026, did you receive, sell, exchange, or otherwise dispose of any digital assets?” This question must be answered by all taxpayers.