Capital Gains Tax in 2026: Rates, Brackets, and the 3.8% NIIT Surtax Explained

The federal capital gains rate is not a single number. It depends on your holding period, total taxable income, the type of asset, and whether the 3.8% Net Investment Income Tax (NIIT) applies. For 2026, long-term capital gains are taxed at 0%, 15%, or 20% depending on taxable income brackets. Short-term gains are taxed at ordinary income rates up to 37%. The 3.8% NIIT layers on top for high earners, pushing the effective rate on long-term gains to 23.8%. Selling at 11 months instead of 12 can cost a 24%-bracket investor 9 percentage points, or $9,000 per $100,000 of gain. Use our Capital Gains Tax Calculator to calculate your exact liability, and check your total tax burden with the Take-Home Pay Calculator.

2026 Long-Term Capital Gains Brackets

Long-term capital gains apply to assets held more than one year. The 2026 thresholds come from IRS Rev. Proc. 2025-32 and reflect a modest 2.8% inflation adjustment.

Short-term capital gains (assets held one year or less) are taxed at the same ordinary rates as wages, from 10% to 37%.

The 20% top bracket only kicks in at relatively high incomes. Most taxpayers stay in the 15% bracket. A single filer with $80,000 in taxable income including $20,000 in long-term gains pays 0% on the portion of gains below $49,450 and 15% on the portion above, according to TS CPA's 2026 capital gains guide.

The 3.8% Net Investment Income Tax

The NIIT under IRC Section 1411 imposes a 3.8% tax on the lesser of net investment income or modified AGI above specific thresholds. Unlike the capital gains brackets, the NIIT thresholds are not indexed for inflation. They have been fixed since 2013.

In 2013, $200,000 was a high-earner threshold. In 2026, inflation has eroded that boundary and more middle-income professionals are affected, as noted by Wealthvieu's NIIT analysis.

The NIIT stacks on top of the standard long-term capital gains rates:

For short-term gains at the top ordinary rate, the combined rate with NIIT reaches 40.8% (37% + 3.8%).

Step-by-Step: Capital Gains Tax Calculation

Consider a single filer with $220,000 in modified AGI for 2026, including $40,000 in long-term capital gains from selling stock held for three years. The filer has no other investment income.

Long-term capital gains tax:

• The 0% bracket applies to taxable income up to $49,450. Since the filer's taxable income exceeds this, the 15% rate applies to the gains.
• Long-term capital gains tax: $40,000 x 15% = $6,000

NIIT calculation:

• MAGI above threshold: $220,000 - $200,000 = $20,000
• Net investment income: $40,000
• NIIT applies to the lesser amount: $20,000
• NIIT: $20,000 x 3.8% = $760

Total federal tax on the gains:

• $6,000 + $760 = $6,760
• Effective rate: $6,760 / $40,000 = 16.9%

Now consider the same filer with $600,000 in modified AGI including $200,000 in long-term gains:

Long-term capital gains tax:

• The 20% bracket applies to taxable income over $545,500. The portion of gains in the 20% bracket: $600,000 - $545,500 = $54,500 at 20%. The remaining $145,500 at 15%.
• Long-term capital gains tax: $145,500 x 15% + $54,500 x 20% = $21,825 + $10,900 = $32,725

NIIT calculation:

• MAGI above threshold: $600,000 - $200,000 = $400,000
• Net investment income: $200,000
• NIIT applies to the lesser amount: $200,000
• NIIT: $200,000 x 3.8% = $7,600

Total federal tax on the gains:

• $32,725 + $7,600 = $40,325
• Effective rate: $40,325 / $200,000 = 20.2%

Special Asset Categories

Not all capital gains are taxed at the standard 0/15/20% rates. Some asset types have their own rate caps:

The Section 1202 exclusion allows 100% exclusion of gain on qualified small business stock held more than five years, subject to a $10 million or 10x basis cap. This is one of the most powerful capital gains avoidance provisions in the tax code, as highlighted in the CalcFi 2026 capital gains guide.

Strategies to Reduce Your Capital Gains Tax

Tax-loss harvesting. Selling losing positions to offset gains reduces net investment income, which reduces both the capital gains tax and the NIIT. The wash sale rule prohibits repurchasing the same or a substantially identical security within 30 days before or after the sale.

Spreading sales across tax years. A large sale that pushes all gains into the 20% bracket in one year can be split across two years to keep some gains in the 15% bracket. The NIIT thresholds are also per-year, so spreading a sale can keep some of the gain under the $200,000 (single) or $250,000 (MFJ) MAGI threshold.

Holding past the one-year mark. The difference between short-term and long-term treatment is significant. A single filer in the 24% ordinary bracket selling a $100,000 gain at 11 months pays $24,000 in federal tax. Holding one more month to qualify for long-term treatment drops the rate to 15%, saving $9,000.

Using the 0% bracket. Taxpayers with taxable income below $49,450 (single) or $98,900 (MFJ) pay 0% on long-term gains. Retirees in low-income years, students, and taxpayers between jobs can harvest gains tax-free if their total taxable income stays below the threshold.

Donating appreciated stock. Donating long-term appreciated stock to a qualified charity avoids capital gains tax on the appreciation and provides a deduction for the full fair market value.

Common Mistakes in Capital Gains Planning

Not checking the holding period before selling. The one-year cutoff is strict. Selling one day before the one-year mark produces a short-term gain taxed at ordinary rates. Check the acquisition date before any sale.

Forgetting about state capital gains taxes. Most states tax capital gains as ordinary income. California's top rate is 13.3%, which means a California investor at the top federal bracket could pay 20% + 3.8% + 13.3% = 37.1% on long-term gains, as noted by Taxopilot's 2026 capital gains calculator.

Not accounting for NIIT when planning a sale. Many investors calculate their capital gains tax using only the 0/15/20% brackets and are surprised by the additional 3.8% NIIT. Always check whether your MAGI will exceed the $200,000 (single) or $250,000 (MFJ) threshold.

Ignoring the crypto wash sale gap. The wash sale rule currently does not apply to cryptocurrency in 2026 because the IRS classifies crypto as property, not a security. This means you can sell crypto at a loss and repurchase it immediately without disallowing the loss. This gap may close in future legislation.

Not tracking cost basis improvements. Reinvested dividends increase your cost basis. Failing to account for reinvested dividends overstates your gain and inflates your tax liability. Check your broker's cost basis records before calculating gains.

Related Tools on ProfessionCalculators.com

• Capital Gains Tax Calculator to calculate your exact liability
• Take-Home Pay Calculator to see after-tax income including investment gains
• Self-Employment Tax Calculator for business owners with both earned and investment income
• State Income Tax Calculator to calculate state-level capital gains tax

For a broader look at business tax planning, read our guide on S-Corp Salary vs Distribution in 2026.

FAQ

What are the 2026 long-term capital gains tax rates? Long-term capital gains (assets held more than one year) are taxed at 0%, 15%, or 20% depending on your taxable income. For single filers, the 0% rate applies up to $49,450, the 15% rate from $49,451 to $545,500, and the 20% rate above $545,500. For married filing jointly, the thresholds are $98,900 and $613,700.

What is the NIIT and who pays it? The Net Investment Income Tax is a 3.8% surtax on investment income, including capital gains, dividends, interest, and rental income. It applies to the lesser of net investment income or modified AGI above $200,000 (single), $250,000 (MFJ), or $125,000 (MFS). The thresholds are not inflation-adjusted.

What is the difference between short-term and long-term capital gains? Short-term gains (assets held one year or less) are taxed at ordinary income rates, up to 37%. Long-term gains (held more than one year) are taxed at preferential rates of 0%, 15%, or 20%. For a high earner, the difference between 37% and 20% is 17 percentage points.

How can I avoid paying capital gains tax? Strategies include tax-loss harvesting to offset gains, spreading large sales across multiple tax years, holding assets past the one-year mark, harvesting gains in years when your income falls in the 0% bracket, donating appreciated stock to charity, and investing in Qualified Small Business Stock under Section 1202.

Are the NIIT thresholds adjusted for inflation? No. The NIIT thresholds have been fixed at $200,000 (single), $250,000 (MFJ), and $125,000 (MFS) since 2013. They are not indexed for inflation, which means more taxpayers cross into NIIT territory each year as nominal incomes rise.

Conclusion

The 2026 capital gains tax system has three layers: the 0/15/20% rate brackets, the 3.8% NIIT surtax, and state-level taxation. The combined federal rate on long-term gains ranges from 0% to 23.8% depending on your income and filing status. The most impactful planning moves are simple: hold assets past the one-year mark to qualify for long-term rates, harvest losses to offset gains, spread large sales across tax years to manage bracket placement, and check whether your MAGI will trigger the NIIT. The thresholds for the 0% bracket ($49,450 single, $98,900 MFJ) and the NIIT ($200,000 single, $250,000 MFJ) are the two numbers that matter most for planning.