Short-Term vs Long-Term Capital Gains
Capital gains are taxed differently depending on how long you hold an asset. Gains on assets sold within one year are short-term and taxed at ordinary income rates, while assets held longer than one year benefit from long-term capital gains rates.
2026 Long-Term Capital Gains Rates
In 2026, long-term capital gains rates are 0%, 15%, and 20%. Your filing status and taxable income determine which rate applies. For example, a married couple filing jointly may qualify for 0% on lower gains, while higher earners pay 20%.
Understanding Basis and Holding Periods
Your cost basis is the amount you paid for an investment, adjusted for commissions and improvements. The gain is the sales price minus that adjusted basis. Timing your sale to meet the one-year holding period can save you substantially.
Netting Gains and Losses
If you have both gains and losses in the same year, the IRS allows you to offset them. Losses beyond your gains can even reduce ordinary income by up to $3,000 per year, with excess losses carried forward to future tax years.
Strategies for Investors
Consider selling appreciated assets in years when your income is lower, harvesting losses to offset gains, or using tax-advantaged accounts for short-term trading. Our calculators help you compare the tax impact of different selling strategies.
State and Federal Interaction
Remember that state tax can add another layer. Some states tax capital gains as ordinary income, while others offer preferential treatment. Use both federal and state tax estimates to choose the best timing for your sales.