Capital Gains Tax Calculator

Short-Term vs. Long-Term Capital Gains

The IRS distinguishes between short-term and long-term capital gains based on how long you held the asset before selling. This distinction is one of the most impactful variables in investment tax planning because the rate difference can be substantial — up to 17 percentage points for high-income taxpayers.

Short-term capital gains apply to assets held for one year or less. These gains are taxed at your ordinary income tax rate, which ranges from 10% to 37% for the 2026 tax year. If you buy a stock on January 15, 2024 and sell it on January 14, 2025, the gain is short-term. Sell on January 16, 2025 (more than one year later), and it becomes long-term.

Long-term capital gains receive preferential tax treatment at three rates: 0%, 15%, or 20%. The rate depends on your taxable income and filing status. Long-term gains are "stacked" on top of your ordinary taxable income to determine which bracket applies. This stacking mechanism means your ordinary income level directly affects the tax rate on your investment gains.

2026 Long-Term Capital Gains Brackets

The IRS adjusts these thresholds annually for inflation. For 2026 (IRS Revenue Procedure 2025-32):

These thresholds are based on taxable income (after the standard deduction), not gross income. The standard deduction for 2026 is $16,100 (single), $32,200 (MFJ), or $24,150 (head of household).

The 0% Capital Gains Bracket

The 0% long-term capital gains bracket is one of the most underutilized tools in tax planning. If your taxable income (including the gains) stays below the threshold, you pay zero federal tax on long-term gains. This creates several strategic opportunities:

• Tax-gain harvesting: Intentionally selling appreciated assets to reset your cost basis higher, paying 0% tax on the gains. This reduces future tax liability when you eventually sell at a higher income level.
• Early retirement years: Between leaving work and claiming Social Security, your income may be low enough to realize significant gains at 0%.
• Gap years or sabbaticals: A year with lower income creates a window to harvest gains tax-free.
• Coordination with Roth conversions: Balance Roth conversion amounts with capital gains harvesting to stay within the 0% bracket.

Net Investment Income Tax (NIIT)

The NIIT is a 3.8% surtax on net investment income, established by the Affordable Care Act (IRC Section 1411). It applies when your modified adjusted gross income (MAGI) exceeds:

• $200,000 for single filers
• $250,000 for married filing jointly
• $125,000 for married filing separately

The NIIT applies to the lesser of your net investment income or the amount by which your MAGI exceeds the threshold. Net investment income includes capital gains, dividends, interest, rental income, and royalties. It does not include wages, Social Security benefits, or distributions from qualified retirement plans.

Unlike the LTCG brackets, NIIT thresholds are not inflation-adjusted. They have remained unchanged since 2013, meaning more taxpayers are subject to NIIT each year due to income growth — a form of "bracket creep."

Tax-Loss Harvesting

Tax-loss harvesting is the practice of selling investments at a loss to offset capital gains and reduce your tax bill. The mechanics work as follows:

1. Short-term losses first offset short-term gains
2. Long-term losses first offset long-term gains
3. Remaining losses cross-offset (short-term losses can offset long-term gains and vice versa)
4. Up to $3,000 of net capital losses can offset ordinary income per year ($1,500 for MFS)
5. Excess losses are carried forward indefinitely to future tax years

The wash sale rule (IRC Section 1091): You cannot deduct a loss if you purchase a "substantially identical" security within 30 days before or after the sale. This rule applies across all your accounts, including IRAs. A common workaround is to replace the sold security with a similar (but not substantially identical) investment — for example, selling one S&P 500 ETF and buying a total market ETF.

Sell Now vs. Wait: The Holding Period Decision

The decision to sell a profitable investment before or after the one-year mark can have significant tax implications. Consider a $50,000 gain for a single filer with $100,000 in ordinary income:

• Sell at 11 months (short-term): Taxed at your marginal ordinary income rate (24% bracket), costing approximately $12,000 in federal tax.
• Wait 1 more month (long-term): Taxed at 15% LTCG rate, costing approximately $7,500 in federal tax — a savings of $4,500.

Of course, the decision is not purely about tax. The asset's price could change during the waiting period. A 1-month delay that saves $4,500 in tax but results in a $10,000 price decline is a net negative. This calculator shows you the tax differential so you can weigh it against your investment outlook.

State Capital Gains Tax

Most states tax capital gains as ordinary income. Eight states tax neither income nor capital gains (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Wyoming), making them advantageous for realizing large gains. Washington has no income tax but taxes long-term capital gains: 7% above a standard deduction of $278,000 (2025), and 9.9% on taxable gains above $1,000,000. Real estate is exempt and short-term gains are not taxed. A few states, like New Mexico and South Carolina, offer partial exclusions for capital gains. California's top marginal rate of 13.3% means a high-income California resident could face a combined federal + state + NIIT rate exceeding 37% on long-term gains.

State residency for tax purposes is determined by domicile and statutory residency tests (typically spending 183+ days in the state). If you are considering relocating to a no-income-tax state before a large liquidity event, consult a tax attorney — the rules around establishing new domicile are complex and heavily scrutinized by state tax authorities.

Frequently Asked Questions

What is the difference between short-term and long-term capital gains?

Short-term gains apply to assets held one year or less, taxed at your ordinary income rate (10%-37%). Long-term gains apply to assets held more than one year, taxed at preferential rates of 0%, 15%, or 20%. The holding period is measured from the day after purchase to the sale date.

What are the 2026 long-term capital gains tax brackets?

For single filers: 0% up to $49,450, 15% up to $545,500, and 20% above. For married filing jointly: 0% up to $98,900, 15% up to $613,700, and 20% above. These are taxable income thresholds (after the standard deduction).

What is the Net Investment Income Tax (NIIT)?

A 3.8% surtax on investment income for taxpayers with MAGI above $200,000 (single) or $250,000 (MFJ). It applies to the lesser of net investment income or the MAGI excess over the threshold. Established under IRC Section 1411.

How does tax-loss harvesting work?

Sell investments at a loss to offset gains. Losses first offset same-type gains, then cross-offset. Up to $3,000 of net losses offset ordinary income per year. The wash sale rule prevents repurchasing substantially identical securities within 30 days.

What is the 0% capital gains bracket and how can I use it?

You pay 0% federal tax on long-term gains if your total taxable income stays below the threshold ($49,450 single, $98,900 MFJ for 2026). Strategies include harvesting gains in low-income years, early retirement before Social Security, and coordinating with Roth conversions.