Capital Gains Tax Bracket Explained

Short answer: A capital gains tax bracket is the income range that decides the federal tax rate on the profit you make when you sell an asset, such as shares, a fund, or property, for more than you paid for it. For long term gains in the 2026 tax year, the federal rates are 0 percent, 15 percent, or 20 percent, depending on your total taxable income and your filing status. For a single filer in 2026, the 0 percent rate covers taxable income up to 49,450 dollars, the 15 percent rate covers taxable income from 49,451 dollars to 545,500 dollars, and the 20 percent rate applies above 545,500 dollars. For married couples filing jointly in 2026, the 0 percent rate covers taxable income up to 98,900 dollars, the 15 percent rate covers taxable income from 98,901 dollars to 613,700 dollars, and the 20 percent rate applies above 613,700 dollars. Those 2026 thresholds come from IRS Revenue Procedure 2025-32.

If you sell after holding an asset for one year or less, the gain is short term, and it is taxed as ordinary income. If you sell after holding it for more than one year, the gain is long term, and it gets the lower 0 percent, 15 percent, or 20 percent rates.

What is a capital gain?

A capital gain is the profit you make when you sell a capital asset for more than you paid for it. A capital asset can be shares, a fund, an exchange traded fund, a bond, property, a collectible, or another investment you own. The gain is the sale price minus your cost basis, which is usually what you paid, plus certain costs such as purchase fees where the tax rules allow them. If you sell for less than you paid, you have a capital loss, not a gain.

For example, you buy shares for 5,000 dollars and later sell them for 7,000 dollars. Your gain is 2,000 dollars. Tax applies to the 2,000 dollar gain, not to the full 7,000 dollar sale price.

Short term vs long term: the one year line

The holding period decides your rate. It starts the day after you buy an asset, and it ends on the day you sell it. If you hold an asset for one year or less, any gain is short term. Short term gains are taxed as ordinary income, at the same rates as your wages. In the 2026 tax year, ordinary income tax rates run from 10 percent up to 37 percent, depending on your income and filing status. That means a short term gain can be taxed at a much higher rate than a long term gain on the same profit.

If you hold an asset for more than one year, any gain is long term. Long term gains get the preferential rates of 0 percent, 15 percent, or 20 percent. Buy on January 10, 2026 and sell on January 10, 2027, and you have held for one year, so the gain is short term. Buy on January 10, 2026 and sell on January 11, 2027, and you have held for more than one year, so the gain is long term. One day can change your rate, so check the dates before you sell.

The 2026 long term capital gains tax brackets

The figures below are for the 2026 tax year, for returns filed in early 2027, from IRS Revenue Procedure 2025-32. They apply to taxable income, which is your total income after your standard deduction or itemised deductions, not to your gross income.

Single filers, 2026 tax year

For a single filer in 2026, the 0 percent rate applies to taxable income up to 49,450 dollars. The 15 percent rate applies to taxable income from 49,451 dollars to 545,500 dollars. The 20 percent rate applies to taxable income above 545,500 dollars.

Married filing jointly, 2026 tax year

For married couples filing jointly, and for a qualifying surviving spouse, in 2026, the 0 percent rate applies to taxable income up to 98,900 dollars. The 15 percent rate applies to taxable income from 98,901 dollars to 613,700 dollars. The 20 percent rate applies to taxable income above 613,700 dollars.

Head of household, 2026 tax year

For a head of household filer in 2026, the 0 percent rate applies to taxable income up to 66,200 dollars. The 15 percent rate applies to taxable income from 66,201 dollars to 579,600 dollars. The 20 percent rate applies to taxable income above 579,600 dollars.

Married filing separately, 2026 tax year

For married taxpayers filing separately in 2026, the 0 percent rate applies to taxable income up to 49,450 dollars. The 15 percent rate applies to taxable income from 49,451 dollars to 306,850 dollars. The 20 percent rate applies to taxable income above 306,850 dollars.

Those are the 2026 figures. For a single filer in 2025, the 0 percent ceiling was 48,350 dollars, and for married couples filing jointly, 96,700 dollars.

How the rate applies only to the gain, and how gains stack

Crossing into a higher bracket does not mean all of your income is taxed at the higher rate. The capital gains rate applies only to the gain, and only to the part of the gain that falls in each bracket. Think of your taxable income as a stack. Your ordinary income, such as wages, fills the stack first, from the bottom up. Your long term capital gain sits on top of that ordinary income. The part of the gain that fits under the 0 percent ceiling is taxed at 0 percent. The part that falls in the 15 percent range is taxed at 15 percent. Only the part that rises above the 15 percent ceiling is taxed at 20 percent. For a single filer in 2026, if your wages alone give you 40,000 dollars of taxable income, you have 9,450 dollars of room left under the 0 percent ceiling of 49,450 dollars. The first 9,450 dollars of a long term gain fills that room and is taxed at 0 percent. That stacking rule is why two sellers with the same gain can pay different tax.

Worked example: a single filer with room left at 0 percent

This is an illustration with round numbers, using the verified 2026 thresholds. Suppose Alex is a single filer in the 2026 tax year, with 40,000 dollars of taxable income from wages, after deductions. Alex sells shares held for more than one year, so the gain is long term. The gain is 10,000 dollars. Total taxable income is 50,000 dollars.

The room left under the 0 percent ceiling of 49,450 dollars is 49,450 minus 40,000, which is 9,450 dollars. The first 9,450 dollars of the gain is taxed at 0 percent. The rest is 10,000 minus 9,450, which leaves 550 dollars. That 550 dollars is taxed at 15 percent, which is 82.50 dollars. Total federal tax on the 10,000 dollar gain is 82.50 dollars.

A seller with 60,000 dollars of taxable wages and the same 10,000 dollar gain would pay 1,500 dollars, because there is no room left at 0 percent.

If Alex had sold after holding for one year or less, the same 10,000 dollar gain would have been short term, and taxed as ordinary income. At a 22 percent ordinary rate, for illustration, the tax would have been 2,200 dollars, instead of 82.50 dollars. A third case shows the 20 percent rate. A single filer with 540,000 dollars of wage income and a 20,000 dollar gain has total taxable income of 560,000 dollars. The first 5,500 dollars of the gain is taxed at 15 percent, which is 825 dollars, and the remaining 14,500 dollars is taxed at 20 percent, which is 2,900 dollars. Total tax is 3,725 dollars. Only the part above the ceiling is taxed at 20 percent.

The net investment income tax, in simple terms

On top of the capital gains rates, some higher earners owe an extra tax called the net investment income tax, often shortened to NIIT. It is a 3.8 percent federal surtax on certain investment income, including capital gains, dividends, interest, and rent. It is worked out on IRS Form 8960, and it applies in addition to the capital gains tax. The NIIT applies only when your modified adjusted gross income, known as MAGI, is above a fixed threshold for your filing status. Those thresholds are not adjusted for inflation, and they have stayed the same since 2013. For a single filer, the threshold is 200,000 dollars. For married couples filing jointly, it is 250,000 dollars. For married taxpayers filing separately, it is 125,000 dollars.

The tax is 3.8 percent of the lesser of two numbers: your net investment income for the year, or the amount by which your MAGI is above your threshold. Suppose Sam is a single filer in 2026, with MAGI of 220,000 dollars and net investment income of 30,000 dollars. The excess over the threshold is 20,000 dollars. NIIT is 3.8 percent of 20,000 dollars, which is 760 dollars. That is why the top federal rate on a long term gain can reach 23.8 percent for a high earner.

How to work out your own rate, step by step

Step 1: Write down your filing status. Step 2: Work out your holding period. More than one year means long term. Step 3: Work out your gain. Sale price minus cost basis. Step 4: Work out your total taxable income, including the gain. Step 5: Find your 0 percent ceiling for your filing status and tax year. For 2026, a single filer uses 49,450 dollars, and a married couple filing jointly uses 98,900 dollars. Subtract your other taxable income from that ceiling to find how much room is left at 0 percent. Step 6: Split the gain into parts, and add the tax on each part together. Step 7: Check the NIIT, if your MAGI is above 200,000 dollars as a single filer, or 250,000 dollars as a married couple filing jointly. Step 8: Check state tax. Keep a copy of your calculation with your tax records.

Common mistakes to avoid

The most common mistake is using the wrong tax year figures. Always use the figures for the year you sell. Another mistake is thinking the rate applies to the full sale price. It applies only to the gain. A third mistake is forgetting that gains stack on top of wages. A fourth mistake is selling one day too early and turning a long term gain into a short term gain. A fifth mistake is forgetting the NIIT, or forgetting state tax. A sixth mistake is not keeping records of your buy date, buy price, sale date, and sale price.

How capital gains fit into a wider investing plan

Understanding your capital gains tax bracket helps you plan a sale, but it should not be the only factor in an investing decision. Your total FICA contribution, which funds Social Security and Medicare, is a separate payroll tax on your wages. See: Your Total FICA Contribution Explained Knowing your discretionary income helps you decide how much you can invest, and how much you can set aside for tax after a sale. See: What Is Discretionary Income? The tax treatment inside a retirement account is different from the tax treatment in a normal brokerage account. See: What Is a Retirement Account, in Simple Terms? For the 2026-27 aid year, the federal FAFSA deadline is June 30, 2027 at 11:59 p.m. Central Time, but state and college deadlines are usually much earlier. See: FAFSA Due Date Explained

FAQ

What is a capital gains tax bracket?

It is the income range that decides the federal tax rate on a capital gain. For long term gains in 2026, the rates are 0 percent, 15 percent, or 20 percent.

How long do I need to hold an asset for the long term rate?

More than one year. If you hold for one year or less, the gain is short term and is taxed as ordinary income.

Is the tax on the full sale price or only on the gain?

Only on the gain. If you buy for 5,000 dollars and sell for 7,000 dollars, the gain is 2,000 dollars, and tax applies to that 2,000 dollars.

Can I pay 0 percent tax on a capital gain?

Yes, if your total taxable income, including the gain, stays under the 0 percent ceiling for your filing status. For a single filer in 2026, that ceiling is 49,450 dollars.

What is the net investment income tax?

It is an extra 3.8 percent federal surtax on certain investment income when your modified adjusted gross income is above a fixed threshold: 200,000 dollars for a single filer, and 250,000 dollars for a married couple filing jointly.

Do the thresholds change each year?

Yes. The IRS adjusts the thresholds for inflation each year. For a single filer, the 0 percent ceiling rose from 48,350 dollars in 2025 to 49,450 dollars in 2026.

Do I pay state tax as well?

In most states, yes. State rules are separate from federal rules. The federal rates in this article do not include state tax.

Does selling my main home work the same way?

Not always. You may be able to exclude up to 250,000 dollars of gain as a single filer, or up to 500,000 dollars as a married couple filing jointly, on the sale of your main home, if you meet the tests in IRS Topic No. 701.

Conclusion

A capital gains tax bracket is simply the income range that sets your rate on the profit from a sale. For long term gains in the 2026 tax year, the federal rates are 0 percent, 15 percent, and 20 percent. For a single filer in 2026, the 0 percent rate covers taxable income up to 49,450 dollars, the 15 percent rate covers taxable income from 49,451 to 545,500 dollars, and the 20 percent rate applies above 545,500 dollars. For a married couple filing jointly in 2026, the figures are 98,900 dollars, 98,901 to 613,700 dollars, and above 613,700 dollars. Those thresholds come from IRS Revenue Procedure 2025-32, and they apply to taxable income, not to gross income. The rate applies only to the gain, and gains stack on top of your other income. Before you sell, check your filing status, your holding period, your gain, and your total taxable income for the tax year of the sale. You can read the official rules in the IRS Topic No. 409, Capital gains and losses.

This article is for general information and education only. It is not legal or financial advice.