Wondering what capital gains tax you'll owe in 2026? It really depends on how long you held your asset, your income, and your state. Here's a breakdown of federal rates, extra taxes, some state examples, how to calculate your tax, common pitfalls, and tips to reduce what you owe.

Quick-reference: key figures at a glance (2026)

Just pick a line to see the key numbers quickly.

  • Federal long-term capital gains rates: 0%, 15%, 20%.
  • Short-term capital gains: taxed as ordinary income — top federal rate 37%.
  • Net Investment Income Tax (NIIT): additional 3.8% for high earners (thresholds: $200,000 single, $250,000 married filing jointly, $125,000 married filing separately).
  • State tax examples: California top rate 13.3%; Oregon top rate ~9.9%; Florida has no state income tax.
  • Typical brokerage trade cost: many brokers offer $0 stock/ETF trades; specialized fees (mutual fund loads, advice fees) vary from $0 to several hundred dollars annually.
  • IRS forms used: Form 8949 and Schedule D attach to Form 1040.

Detailed federal breakdown

Capital gains fall into two main categories.

Short-term gains — assets held one year or less — are taxed as ordinary income. Federal ordinary-income rates top out at 37%. So if you sell an asset after 11 months, your gain can be taxed at 10%, 12%, 22%, 24%, 32%, 35% or 37% depending on your taxable income bracket.

Long-term gains — assets held more than one year — get preferential federal rates: 0%, 15% or 20% depending on taxable income. Those three rates are the starting point for most investors in 2026.

High earners can face extra surtaxes. The Net Investment Income Tax (NIIT) adds 3.8% on top of the federal rate when modified adjusted gross income exceeds the thresholds: $200,000 for single filers, $250,000 for married filing jointly, and $125,000 for married filing separately.

That means high earners might pay 23.8% federal tax on qualifying long-term gains.

The top federal short-term result can be steep: 37% ordinary income tax plus 3.8% NIIT equals 40.8% before state tax.

How states change the math

State taxes vary: some treat capital gains like regular income, while others don't tax them.

  • California: taxes capital gains as ordinary income. State top rate 13.3%. Example: a wealthy Californian with a long-term gain could face 20% (federal) + 3.8% (NIIT) + 13.3% (CA) = 37.1% total federal+state tax on that gain.
  • Oregon: high state rates — top marginal rate around 9.9%. Combined example: 20% + 3.8% + 9.9% = 33.7%.
  • Florida, Texas, Washington: no state income tax. Example: 20% + 3.8% NIIT = 23.8% for high earners.
  • New York State: top state rate near 10.9% for very high incomes — city taxes can add more for NYC residents.

Nine states have no broad-based personal income tax (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming, and New Hampshire — though New Hampshire taxes interest/dividends differently). That can cut your total capital gains bill substantially.

Step-by-step: calculate the capital gains tax you owe

You need to do this for every sale in your taxable account.

  1. Find your basis: what you paid for the asset, plus commissions, plus reinvested dividends. Example: buy 100 shares at $10 = $1,000; $10 commission means basis $1,010.
  2. Determine sale proceeds: price times shares minus selling costs. Example: sell for $50 per share = $5,000 proceeds; $0 commission on many brokers.
  3. Compute gain or loss: proceeds minus basis. Example: $5,000 - $1,010 = $3,990 gain.
  4. Check holding period: >1 year = long-term; ≤1 year = short-term.
  5. Net gains and losses across sales: short-term losses first offset short-term gains; long-term losses offset long-term gains. Excess losses offset the other bucket, then up to $3,000 of excess losses can offset ordinary income per year, with the remainder carried forward.
  6. Apply rates: long-term gains use 0/15/20. Short-term gains use ordinary tax brackets up to 37%. Add NIIT 3.8% if your income is above thresholds.
  7. File forms: report transactions on Form 8949, summarize on Schedule D, and include both with Form 1040.

Examples with numbers

Example A — moderate earner, long-term gain:

  • Gain: $40,000.
  • Long-term rate assumed: 15% → federal tax $6,000.
  • No NIIT because MAGI below $200,000. No state tax in Florida → total tax $6,000 (15% effective).

Example B — high earner in California:

  • Gain: $100,000 long-term.
  • Federal 20% = $20,000.
  • NIIT 3.8% = $3,800.
  • California tax ~13.3% = $13,300.
  • Total tax ≈ $37,100 → effective rate 37.1%.

Example C — short-term loss offset:

  • Short-term loss: $5,000; short-term gain: $2,000 → net short-term loss $3,000.
  • That $3,000 offsets ordinary income directly, cutting tax at ordinary rates.

Costs, fees and paperwork

Brokerages now commonly offer $0 stock and ETF trades. Still, watch for:

  • Mutual fund loads and 12b-1 fees: can be up to 1% or more annually.
  • Advisory fees: 0.25%–1.5% of assets under management per year.
  • Cost-basis reporting: brokers issue Form 1099-B. If your broker lacks basis info for older lots, the IRS expects accurate buyer-supplied basis reporting — keep records.
  • Tax prep costs: DIY software $0–$200; professional tax prep $200–$1,000+ depending on complexity.

Common mistakes to avoid

  • Misreporting basis — forgetting reinvested dividends or commissions can overstate tax.
  • Triggering a wash sale — repurchasing the same or substantially identical security within 30 days disallows the loss.
  • Ignoring state tax on capital gains — it can add 5% to 13% more tax depending on the state.
  • Assuming inherited assets always create taxable gains — most inherited assets get a stepped-up basis to fair market value at death, often eliminating gains accrued before inheritance.
  • Forgetting to net short- and long-term gains correctly — they’re netted in separate buckets before cross-offsets.

Alternatives and strategies to lower tax

  • Tax-loss harvesting: sell losers to offset gains; you can carry forward unused losses indefinitely.
  • Hold at least one year to get long-term rates — that alone can drop the federal rate from as high as 37% to as low as 0% or 15%.
  • Use tax-advantaged accounts: Roth IRAs and 401(k)s grow tax-free; sales inside don’t trigger capital gains taxes now.
  • 1031 exchanges for real estate (deferred tax on like-kind real property exchanges when rules met).
  • Gifting and charitable giving: gifting to family or donating appreciated assets to a qualified charity can avoid capital gains tax and produce other tax benefits.

Forecast and what to watch in 2026

Policy discussions sometimes target capital gains — proposals range from taxing gains at ordinary rates for very high earners to changing how inflation is counted into basis. Nothing permanent changed federal long-term rates entering 2026: the three-tier 0/15/20 system and the 3.8% NIIT remain in place. Still, Congress can change tax law, and state tax rules keep shifting — especially in states debating higher top rates. If taxable income rises with inflation, more taxpayers will cross NIIT thresholds and higher brackets.

Related Articles

Capital gains tax in 2026 is still built on three federal long-term rates (0%, 15%, 20%), short-term gains taxed as ordinary income up to 37%, and a 3.8% NIIT for higher earners. State tax rules can move your bill dramatically — from about 23.8% in no-income-tax states for high earners to north of 37% in high-tax states like California. Calculate carefully: basis, holding period, netting, and state rules all matter. Keep records, harvest losses where it makes sense, and use tax-advantaged accounts when possible.