How capital gains are taxed
Gain = sale price − cost basis
- Short-term (owned a year or less): taxed like wages, at your regular bracket rates.
- Long-term (owned more than a year): taxed at 0%, 15% or 20%. The gain sits on top of your other taxable income, so part of it can fall in the 0% band and part in a higher one.
- Net investment income tax: an extra 3.8% on investment income once your modified AGI passes $200,000($250,000 married filing jointly).
2026 long-term capital gains rates
| Filing status | 0% up to | 15% up to |
|---|---|---|
| Single | $49,450 | $545,500 |
| Married filing jointly | $98,900 | $613,700 |
| Head of household | $66,200 | $579,600 |
Amounts are taxable income, including the gain. Above the 15% limit, gains are taxed at 20%.
Worked example
You're single, earn $80,000 and sell shares for a $20,000 gain. After the $16,100 standard deduction, your other taxable income is $63,900, already past the 0% limit, so the whole gain is taxed at 15%: $3,000.
Sell within a year instead and the gain is taxed as ordinary income in the 22% bracket: $4,400, or $1,400 more.
Ways to pay less
- Wait past the one-year mark before selling, when you can.
- Offset gains with losses. Losses cancel gains, and up to $3,000 of extra loss a year comes off your other income, with the rest carried forward.
- Use retirement accounts. Trades inside a 401(k) or IRA aren't taxed as you go. See the Roth IRA calculator.
- Mind low-income years. In a year with little other income, some or all long-term gains may fall in the 0% band.
Questions people ask
Is there a tax break when I sell my home?
Yes. If you owned and lived in it for at least two of the last five years, up to $250,000 of gain ($500,000 for married couples filing jointly) is generally excluded. This calculator doesn't apply that exclusion.
Do I pay tax if I reinvest the money?
Yes. Selling triggers the gain even if you buy something else straight away, unless the trade happens inside a retirement account.
Sources
- IRS: Rev. Proc. 2025-32, section 4.03 (2026 capital gains rate thresholds)
- IRS: Topic 409, capital gains and losses
- IRS: Topic 559, net investment income tax
Reviewed September 26, 2026 by The Dollars World team. How we build and check our calculators · Our data and formulas. This is general information, not financial advice.