Capital Gains Tax on Stocks in 2026: What You Owe When You Sell

How a stock sale is taxed in 2026

Your gain is the sale price minus your adjusted basis, which for stock is generally what you paid plus commissions, adjusted for splits and reinvested dividends. If you held the shares more than one year, the gain is long-term and taxed at 0%, 15% or 20% in 2026. If you held them one year or less, it is short-term and taxed as ordinary income at 10% to 37% in 2026.

The thresholds are from Revenue Procedure 2025-32. They apply to taxable income, after the standard or itemized deduction, and a long-term gain is stacked on top of your ordinary income to decide which rates it falls into. Qualified dividends use the same rates. See the full 2026 long-term capital gains brackets for head of household and married filing separately.

Worked examples: from the 0% bracket to a California concentrated position

A married couple earning $80,000 sells shares for a $150,000 long-term gain in Texas. Part of the gain fills the 0% bracket and the rest is taxed at 15%, for a federal total of $14,835, with no state income tax.

A single California filer earning $400,000 who sells a concentrated position at a $300,000 gain pays $100,527, made up of $55,896 federal tax, $11,400 net investment income tax and $33,232 California tax. California taxes gains at its ordinary income rates, up to 13.3% (2026).

The bracket can work in your favor too. A retired couple with $50,000 of income and a $40,000 long-term gain pays $0 in Florida. If the same $40,000 were a short-term gain it would cost $4,660, which is why the one-year line matters most in low brackets. For the comparison in detail, see short-term vs long-term capital gains.

Choosing which shares you sell: basis methods

If you bought the same stock in several lots at different prices, the lot you sell sets your gain. Brokers default to first-in, first-out (FIFO), which sells your oldest and often cheapest shares first and produces the largest gain.

Under the regulations you may instead identify specific lots at the time of the sale (Treas. Reg. 1.1012-1(c)), and many brokers also offer average cost for mutual funds. Picking the highest-basis lots realizes the smallest gain today.

Always give the broker the instruction before the trade settles. Choosing later, after you see the numbers, is not allowed. Basis and holding period for covered securities are reported on Form 1099-B and carried to Form 8949 and Schedule D.

Wash sales: the 61-day rule on losses

If you sell a stock at a loss and buy the same or a substantially identical security within 30 days before or after the sale, the loss is disallowed for now (IRC 1091).

The disallowed loss is added to the basis of the replacement shares and the holding period carries over, so the loss is deferred rather than lost. The window covers 61 days in total, and it applies across your accounts, including an IRA, so repurchasing in a retirement account can permanently erase the loss.

The rule applies only to losses. A sale at a gain followed by an immediate repurchase raises no wash-sale issue. Selling at a loss to harvest it and buying a similar but not substantially identical fund is the usual workaround.

Losses, the $3,000 limit and carryovers

Capital losses first offset capital gains of the same kind, then the other kind. If losses exceed gains for the year, you can deduct up to $3,000 ($1,500 if married filing separately) against ordinary income, and carry the rest forward with no expiration (IRC 1211(b), 1212(b)).

Losses carried forward keep their short-term or long-term character. Because the deduction is so small compared with a large loss, harvesting losses in a year you also realize a large gain does the most good. The mechanics are in capital loss carryover.

The 3.8% surtax and state tax

Stock gains are net investment income. The 3.8% net investment income tax applies to the lesser of your net investment income or the amount your modified AGI exceeds $250,000 joint or $200,000 single (IRC 1411).

Those thresholds are set by statute and are not adjusted for inflation, so more households cross them each year; see the 3.8% tax on a sale.

States are the second layer: several states have no income tax on wages, and a few tax gains differently, such as Washington's separate capital gains excise tax on large gains. Check your state in the 50-state capital gains table.

Ways to reduce tax on a stock sale

The legitimate levers are timing, basis and character. Hold past one year before selling. Pick high-basis lots.

Pair gains with losses in the same year. Realize gains in a low-income year to use the 0% bracket (0% harvesting).

Donate appreciated shares held over a year to a charity or donor-advised fund, which avoids the gain and can produce a deduction of fair market value up to 30% of AGI (IRC 170(b)(1)(C)). Hold until death, so heirs receive a stepped-up basis (IRC 1014; see step-up at death).

Publicly traded stock cannot be sold on an installment note and defer the gain; the installment method is closed to securities traded on an established market (IRC 453(k)(2)). Large sellers of closely held stock have more options, covered under selling a business.

How much tax would you owe? Run your own numbers

Frequently asked questions