Long-Term Capital Gains Tax in 2026: Rates, Brackets and How a Big Sale Is Taxed

2026 long-term capital gains tax brackets for every filing status

The breakpoints below are taxable income, not the size of the gain, and they come straight from section 3.03 of Rev. Proc. 2025-32, which indexes the IRC 1(j)(5)(B) amounts for tax years beginning in 2026.

Note the last row: a non-grantor trust or estate reaches 20% after only $16,250 of taxable income (Rev. Proc. 2025-32, 2026), which is why trustees often distribute gain to beneficiaries in lower brackets when the trust document allows it.

Gain on anything held one year or less is short-term and taxed as ordinary income at 10% to 37%. The 37% bracket starts above $768,700 for joint filers and $640,600 for single filers (Rev. Proc. 2025-32, 2026), so the gap between a short-term and a long-term sale at the top is 17 points of federal rate before NIIT, which applies to both.

How a capital gain stacks on top of your other income

The IRS fills your brackets in a fixed order under IRC 1(h): ordinary income (wages, pension, interest, IRA withdrawals, short-term gain, recapture) goes in first, and long-term gain sits on top. Your gain never raises the rate on your wages, but your wages decide how much of the gain fits under each breakpoint. A couple with $90,000 of taxable ordinary income has only $8,900 of 0% room left in 2026; a couple with $20,000 has $78,900.

A retired couple, both 65 or older, with $40,000 of pension and interest and an $80,000 gain owes $0 of federal tax on the gain: the 2026 standard deduction ($32,200 plus $1,650 each for age) and the $6,000 senior deduction each (IRC 151(d)(5)(C), 2025 through 2028) keep taxable income under the $98,900 line. A working couple with $150,000 of wages and a $400,000 gain lands entirely in the 15% band: $60,000 of federal tax, $11,400 of NIIT and $71,400 in all, an effective 17.8% in Texas.

Stacking also explains the side effects. A big gain raises adjusted gross income, which drives NIIT, the senior deduction, the 2026 SALT cap and Medicare IRMAA two years later. The big sale year phase-outs page walks through each one.

Special rates: 25% and 28% gain, and recapture taxed as ordinary income

Not every long-term gain gets the 0/15/20% schedule. IRC 1(h) carves out three groups, still in force for 2026:

• Unrecaptured Section 1250 gain, up to 25%. The part of a building's gain equal to straight-line depreciation you took (or could have taken) is taxed at your ordinary rate but never above 25% (IRC 1(h)(1)(E) and 1(h)(6)).
• Collectibles gain, up to 28%. Art, coins, gold and silver bullion, gems and similar items defined in IRC 408(m) are capped at 28% rather than 20% (IRC 1(h)(4) and 1(h)(5), 2026).
• Taxable Section 1202 gain, up to 28%. When qualified small business stock gets only a 50% or 75% exclusion, the taxable half or quarter is 28% rate gain (IRC 1(h)(7)); a 100% exclusion leaves nothing to tax. See the QSBS analysis.
• Section 1245 recapture, ordinary rates up to 37%. Gain on equipment, vehicles and other personal property up to prior depreciation, including bonus and Section 179, is ordinary income in the year of sale even on an installment note (IRC 453(i), 2026 brackets). The depreciation recapture analysis covers both kinds.

The 3.8% net investment income tax

IRC 1411 adds 3.8% on the smaller of your net investment income or the amount your modified AGI exceeds $250,000 joint, $125,000 married filing separately or $200,000 for everyone else. The thresholds are fixed in the statute and have not moved since 2013. The rate applies on top of the 0/15/20% rate, which makes the real federal top rate on a long-term gain 23.8% (2026).

It reaches gain on rentals, land, stock and businesses you do not actively run, but usually not gain on a business in which you materially participate, Section 121 excluded home gain or IRA distributions (see the IRS NIIT page). On a $2,000,000 gain with $250,000 of other income, the engine puts NIIT at $76,000, the full 3.8% of the gain. Estates and trusts pay it on undistributed investment income once adjusted gross income passes the start of their top bracket, $16,000 for 2026 (IRC 1411(a)(2); Rev. Proc. 2025-32). Planning detail lives on the NIIT on a sale page.

The holding period: more than one year

Long-term means held more than one year (IRC 1222(3)). One year exactly is still short-term. Count from the day after you acquired the asset through the day you sell (IRS Topic 409), so a stock bought on March 10, 2025 becomes long-term on March 11, 2026.

• Inherited property is long-term automatically, even if the heir sells a week after the death (IRC 1223(9)).
• Gifts carry the donor's holding period and basis with them (IRC 1223(2)).
• 1031 replacement property picks up the holding period of the property you gave up (IRC 1223(1)).
• Installment sales lock in character at closing: each later payment's gain keeps the long-term character it had at the sale.

A business sale mixes holding periods and characters: inventory and receivables are ordinary however long you owned the company, so the purchase price allocation matters as much as the date.

What the One Big Beautiful Bill Act changed for capital gains in 2026, and what it did not

P.L. 119-21, signed July 4, 2025, left the core of capital gains tax alone. The 0%, 15% and 20% rates, the 25% and 28% special rates, the one-year holding period and the 3.8% NIIT are unchanged for 2026. The changes sit around the edges, and for a big seller they add up:

• Brackets made permanent (section 70101). The 1(j) bracket structure, including the 1(j)(5) capital gains breakpoints, no longer expires after 2025.
• AMT phase-out reset (section 70107). The 2026 AMT exemption of $140,200 for joint filers now starts phasing out at $1,000,000 of AMT income and disappears at $1,280,400, because the phase-out rate doubled from 25% to 50% (IRC 55(d), Rev. Proc. 2025-32). A large gain can push a seller into AMT on their ordinary income: in the $2,000,000 Texas example the sale adds $27,642 of AMT, already included in the $407,847 of federal tax.
• SALT cap phase-down (section 70120). The state and local tax deduction cap is $40,400 for 2026 but shrinks by 30% of modified AGI over $505,000, to a $10,000 floor (IRC 164(b)(7)).
• Senior deduction (section 70103). $6,000 per person 65 or older for 2025 through 2028, reduced by 6% of modified AGI over $150,000 joint ($75,000 single), so a sizable gain can erase it.
• QSBS expanded (section 70431) to a 50%, 75% or 100% exclusion at three, four or five years and a $15 million cap for stock acquired after July 4, 2025 (IRC 1202).
• Opportunity Zones made permanent (section 70421), with new deferral rules for gain invested after 2026, see Opportunity Zones 2.0.

The state layer

Federal tax is only part of the bill. Most states tax gains as ordinary income, a few give a partial break, and some take nothing. Examples for 2026:

• California taxes gains like wages, up to 12.3% plus a 1% surtax on income over $1 million, 13.3% in all, with no long-term discount (FTB, 2026).
• Texas has no personal income tax, and since voters approved Article 8, Section 24-b of the Texas Constitution on November 4, 2025, the state is also barred from adopting a capital gains tax.
• Washington has no wage tax but charges a 7% excise on long-term gains above its annual deduction ($278,000 for 2025) plus 2.9% on gains over $1 million (RCW 82.87.040, from 2025). Real estate is exempt.
• Missouri lets individuals subtract 100% of capital gains from state income starting with tax year 2025 (Missouri DOR, RSMo 143.121).

The same $2,000,000 gain with $250,000 of other income costs $483,847 in Texas and $718,186 in California, a gap of $234,339: California state tax on the sale is $234,339. Every state plus DC is on the capital gains tax by state page; moving before a sale has rules of its own, covered in the residency change analysis.

How big sellers lower the tax

Rates are fixed by law; the bill is not. The levers are timing, character and residency:

• Section 453 installment sale: spread the gain over the years payments arrive, keeping more of it in the 15% band.
• 1031 exchange: defer gain on real property.
• Opportunity Zones: defer gain invested in a qualified fund within 180 days.
• Charitable remainder trust: sell inside the trust, receive income for years.
• Tax-loss harvesting and 0% gain harvesting: offset gain, or realize it while income is low.
• Year-end timing: close in the year with the most bracket room.
• Holding for the step-up: heirs may sell with little or no gain.
• QSBS and Section 1045: exclude gain on qualifying C corporation stock.
• Changing state residency: move before the gain is recognized.

Business owners start with the selling a business pages and the business sale overview; landlords and investors with selling real estate; farm families with farm, ranch and timber; and anyone checking a number with rules that change the number. To see every path modeled on your own sale, Get the Big Sale Tax Analysis.

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