Margin notes
- If you hold an asset for more than one year, the gain or loss is generally long-term, according to IRS Topic 409.
- For 2026 the 0% long-term rate applies up to $49,450 of taxable income for single filers and $98,900 for joint filers.
- Net short-term capital gains are taxed as ordinary income at graduated rates.
When you sell something you own for more than you paid, the profit is a capital gain. The IRS treats almost everything you own for personal or investment use as a capital asset: stocks and bonds held as investments, your home, even household furniture. How much tax you pay on a gain depends on two things: how long you held the asset and how much other income you have.
Gain or loss: the basic math
IRS Topic 409 defines a capital gain or loss as the difference between your adjusted basis in the asset and the amount you realize from the sale. Basis is generally what you paid. Assets received as a gift or inheritance have their own basis rules, explained in IRS Publication 551.
The one-year line
If you hold an asset for more than one year before you sell, the gain or loss is generally long-term. If you hold it one year or less, it is short-term. The difference matters because net short-term gains are taxed as ordinary income at your regular graduated rates, while long-term gains usually get lower rates.
Tip: Check the purchase date before you sell. Selling a few days too early can turn a long-term gain into a short-term one and move it from the 0% or 15% rate into your ordinary bracket.
2026 long-term capital gains rates
Rev. Proc. 2025-32 sets the 2026 thresholds. The rate depends on your total taxable income, including the gain:
| Filing status | 0% rate up to | 15% rate up to | 20% above |
|---|---|---|---|
| Single | $49,450 | $545,500 | $545,500 |
| Married filing jointly | $98,900 | $613,700 | $613,700 |
| Married filing separately | $49,450 | $306,850 | $306,850 |
| Head of household | $66,200 | $579,600 | $579,600 |
For reference, the 2025 thresholds published in Topic 409 were $48,350 and $533,400 for single filers and $96,700 and $600,050 for joint filers. The IRS notes that for most individuals the rate on most net capital gain is no higher than 15%, and some or all of it may be taxed at 0%.
How the 0% rate works in practice
The thresholds apply to taxable income, after the standard or itemized deduction. A married couple with $90,000 of wages takes the 2026 standard deduction of $32,200, leaving $57,800 of taxable ordinary income. Up to $41,100 of long-term gains on top of that, the gap between $57,800 and $98,900, would fall inside the 0% band. Gains above that would be taxed at 15%. Every situation is different, but this is the reason retirees and people in low-income years sometimes choose to realize gains on purpose.
Exceptions with higher rates
Topic 409 lists cases where long-term gains can be taxed above 20%:
- Collectibles such as coins or art: a maximum 28% rate.
- The taxable part of a gain on section 1202 qualified small business stock: a maximum 28% rate.
- Unrecaptured section 1250 gain on real property, which relates to depreciation: a maximum 25% rate.
The IRS also notes that people with significant investment income may owe the net investment income tax, covered in Topic 559.
Losses offset gains
Capital losses first reduce capital gains. If your losses are larger than your gains, you can use the excess to reduce other income by the lesser of $3,000 ($1,500 if married filing separately) or your total net loss. Anything above that carries forward to later years. The IRS says the deductible loss goes on line 7a of Form 1040, and the amount to carry forward can be figured with the Capital Loss Carryover Worksheet in Publication 550 or in the Schedule D instructions. Selling losing positions deliberately to use this rule is called tax-loss harvesting, and it has a trap called the wash sale rule; both are explained in Tax-Loss Harvesting: Turning Investment Losses Into Tax Savings.
Your home is different
A home is a capital asset, but gains on a main home get a separate exclusion: up to $250,000 of gain, or $500,000 on a joint return, if you meet the ownership and use tests in IRS Topic 701. See Tax Breaks for Homeowners: Mortgage Interest, Property Tax and the Home Sale Exclusion.
Retirement accounts skip all of this
Trades inside a 401(k) or IRA do not create yearly capital gains. Money in a traditional account is taxed when withdrawn; qualified withdrawals from a Roth IRA are tax-free, the IRS says. That is one reason holding frequently traded investments inside retirement accounts can reduce taxes; see Retirement Accounts and Taxes: 401(k), Traditional IRA and Roth IRA in 2026.
Reporting
Most sales are reported on Form 8949 and summarized on Schedule D of Form 1040. If Schedule D does not apply to you, Topic 409 says to check the appropriate box on line 7b of Form 1040 instead. If you have a taxable gain, the IRS says you may need to make estimated tax payments during the year rather than waiting until you file. For the big picture of how gains fit with other strategies, see How the Wealthy Reduce Taxes Legally, and the Versions You Can Use.