Capital Gains Tax Rates: Short-Term vs Long-Term (2025–2026)

Selling a stock, real estate, or other investment at a profit triggers a capital gains tax. The rate you pay depends on two things: how long you held the asset and your total taxable income. This guide covers the 2025 and 2026 capital gains tax rates, the powerful 0% bracket, and strategies to minimize what you owe.

Key Takeaways

• Short-term gains (held ≤ 1 year) are taxed at ordinary income rates (10%–37%).
• Long-term gains (held > 1 year) are taxed at 0%, 15%, or 20%.
• The 0% rate is available to taxpayers with lower taxable income — not just retirees.
• The 3.8% Net Investment Income Tax (NIIT) can apply on top of these rates for high earners.

2026 Long-Term Capital Gains Tax Rates

2025 Long-Term Capital Gains Rates (for comparison)

Short-Term Capital Gains

Short-term capital gains — from assets sold after being held for one year or less — are taxed at your ordinary income tax rate. There is no special preferential rate. For high earners, this means short-term gains can be taxed at up to 37%.

This is why holding period matters. An investor in the 32% tax bracket who sells a stock after 11 months pays 32% (plus potentially the 3.8% NIIT). Waiting one more month converts that to a 15% long-term rate — cutting the tax nearly in half.

The 3.8% Net Investment Income Tax (NIIT)

High earners may owe an additional 3.8% surtax on net investment income (including capital gains) under the Net Investment Income Tax. It applies when your modified AGI exceeds:

• $200,000 for Single filers
• $250,000 for Married Filing Jointly

This means the top effective rate on long-term capital gains is actually 23.8% (20% + 3.8%).

How Capital Gains Stack on Income

Capital gains do not exist in a vacuum. They stack on top of your ordinary income when determining which rate applies:

Example: A Married Filing Jointly couple has $80,000 in ordinary taxable income and realizes a $30,000 long-term capital gain in 2026.

1. Their ordinary income uses $80,000 of the 0% bracket ($96,950 threshold).
2. The first $16,950 of the capital gain fills the remaining 0% space → taxed at 0%.
3. The remaining $13,050 spills into the 15% bracket → taxed at 15%.
4. Total capital gains tax: $0 + $1,957.50 = $1,957.50 (effective rate on the gain: ~6.5%).

Strategies to Minimize Capital Gains Taxes

• Hold for more than one year. The simplest strategy: wait to trigger the long-term rate. See our complete guide to tax on stock gains for more on timing.
• Tax loss harvesting. Sell losing positions to offset gains dollar for dollar. Watch the wash sale rule. For a more advanced approach, see direct indexing.
• Harvest gains in low-income years. If you have a gap year, sabbatical, or early retirement, your income may fall into the 0% bracket. Roth conversion ladders pair well with this.
• Use tax-advantaged accounts. Gains inside a Roth IRA or 401(k) grow tax-free or tax-deferred. Optimizing which account holds which asset is called asset location.
• Donate appreciated stock. Gifting long-term appreciated stock to charity avoids capital gains entirely and generates a deduction. See charitable giving strategies and charitable bunching with a donor-advised fund.
• Primary residence exclusion. If you sell your home after living in it for at least two of the last five years, you can exclude up to $250,000 ($500,000 MFJ) of gain. See our home sale capital gains exclusion guide for the full rules.
• 1031 exchange for real estate. Investment property owners can defer capital gains indefinitely using a 1031 like-kind exchange. For even longer deferral, consider Qualified Opportunity Zones.
• Step-up in basis. Inherited assets receive a step-up in basis to fair market value at death, eliminating unrealized gains entirely.

For a comprehensive look at combining these approaches, see our guide on capital gains tax strategies and the broader DIY tax planning for investors playbook.

Capital Gains on Specific Asset Types

Different assets have unique capital gains considerations:

• Stocks and ETFs: Selling shares held in a taxable brokerage triggers capital gains. See taxes on investments for details on dividends and interest too.
• Stock options and RSUs: Stock options (ISO vs NSO) and RSUs have different holding period rules that affect whether gains are short-term or long-term.
• ESPPs: Employee stock purchase plans have qualifying and disqualifying dispositions that affect your capital gains rate.
• Real estate: Capital gains on real estate include special rules for depreciation recapture and the Section 121 exclusion. Rental property owners should also understand MACRS depreciation.
• Cryptocurrency: Crypto gains follow the same short-term/long-term rules as stocks. See crypto tax 101.

Capital Gains vs. Ordinary Income

For a deeper comparison of how these two types of income are taxed — and why it matters for asset allocation — see our guide on Capital Gains vs. Ordinary Income.

How sharper.tax Helps

sharper.tax analyzes your tax return to identify realized capital gains, calculate your effective tax rate, and recommend strategies like tax loss harvesting and asset location to minimize future capital gains taxes. Sophisticated tax planning used to require a high-end CPA — we make it available for free.

Sources

• IRS Topic 409: Capital Gains and Losses
• IRS Revenue Procedure 2024-40 (2025 Rate Thresholds)
• IRS Publication 550: Investment Income and Expenses

The information above is educational and not tax advice.