Capital Gains Tax in 2026: Rates, How to Calculate Your Gain, Forms, and Exceptions

Capital gains tax is usually tax on the profit from disposing of an asset—not on the full sale price. For 2026, most individual taxpayers use a federal 0%, 15%, or 20% long-term rate only after calculating basis, holding period, capital-loss netting, taxable-income stacking, NIIT, and state tax.

Quick answer

Capital gains tax is the federal and state tax that may apply when you realize a profit from selling, exchanging, or otherwise disposing of an asset. It is not one flat federal tax rate. Your result depends on the asset, adjusted basis, selling costs, holding period, taxable income, filing status, capital losses, the 3.8% Net Investment Income Tax, and state rules.

The basic calculation is:

Amount realized − adjusted basis = realized capital gain or loss

For most individual taxpayers, a gain on property held for one year or less is short-term and taxed at ordinary federal income-tax rates. A net gain on property held more than one year is generally taxed at 0%, 15%, or 20% for federal purposes. Collectibles, depreciation-related real-estate gain, employee compensation, and some business-property transactions follow different rules. See the IRS capital gains guidance and Publication 550.

2026 federal long-term capital-gain rates

For tax year 2026, the 0%, 15%, and 20% rates for most long-term gains are determined using taxable income, not gross income and not the amount of the gain alone.

Filing status	0% rate up to taxable income of	15% rate up to taxable income of	20% generally applies above
Single or other individuals	$49,450	$545,500	$545,500
Married filing jointly or surviving spouse	$98,900	$613,700	$613,700
Married filing separately	$49,450	$306,850	$306,850
Head of household	$66,200	$579,600	$579,600
Estates and trusts	$3,300	$16,250	$16,250

These thresholds come from the IRS inflation adjustments for 2026. They are thresholds for the taxpayer’s overall taxable income. If a long-term gain crosses a threshold, only the portion in the higher band is taxed at that higher rate; the entire gain does not automatically receive the top rate. IRS Revenue Procedure 2025-32 and Internal Revenue Bulletin 2025-45.

Short-term gains are included with ordinary taxable income. The 2026 ordinary federal income-tax rates remain 10%, 12%, 22%, 24%, 32%, 35%, and 37%. A long-term gain subject to NIIT can effectively face a federal rate of up to 23.8% before state tax: 20% capital-gain tax plus 3.8% NIIT.

What counts as a capital asset?

Capital assets generally include property held for investment and most personal-use property, including:

• stocks, bonds, mutual funds, and ETFs;
• digital assets and cryptocurrency;
• investment real estate;
• a personal residence;
• collectibles, jewelry, precious metals, and artwork; and
• many other investments and personal possessions.

But not every asset sale produces a capital gain. Property connected with a business may produce ordinary income, Section 1231 gain, depreciation recapture, or a mixture of categories. Important non-capital or differently treated property includes:

• inventory and property held for sale to customers;
• accounts receivable from a business;
• depreciable business property subject to recapture;
• certain real-estate and business assets; and
• the compensation portion of restricted stock, restricted stock units, and stock-option transactions.

For a business sale, the buyer and seller may need to allocate the price among individual assets, so one transaction can contain ordinary income, depreciation-related gain, Section 1231 gain, and capital gain. The IRS rules for sales and other dispositions of assets and its business-sale guidance are the appropriate starting points.

When does capital-gains tax apply?

Tax is generally based on a realization event. A rise in an investment’s market value usually does not create current capital-gains tax by itself. Tax can arise when you sell, exchange, or otherwise dispose of the asset.

Common realization events include:

• selling shares for cash;
• exchanging one investment for another;
• selling or exchanging real estate;
• using cryptocurrency to buy goods or services;
• trading one digital asset for another;
• receiving a capital-gain distribution from a mutual fund or ETF;
• selling a partnership or business interest;
• an option expiring, being exercised, or being closed;
• a worthless security;
• certain involuntary conversions and installment-sale payments; and
• certain constructive sales of appreciated financial positions.

Digital assets are property for federal tax purposes. Selling them for dollars, exchanging them for another digital asset, or using them to pay for goods or services can create a gain or loss even if no cash is withdrawn. A transfer between wallets or accounts you own is generally different from a disposition, but the records must establish that ownership did not change. IRS digital-asset FAQs.

How to calculate a capital gain

For each sale or disposition, calculate the result separately before applying the overall netting rules:

Cash and property received
+ fair market value of services or other consideration
+ certain debt assumed by the buyer
− selling commissions and eligible transaction costs
= amount realized

Amount realized
− adjusted basis
= realized gain or loss

Amount realized

Amount realized can include cash, the fair market value of property or services received, and in some transactions debt that the buyer assumes or pays off. Selling commissions, transfer taxes, and other transaction expenses may reduce the proceeds when the applicable rules allow it.

Adjusted basis

Basis is generally your tax investment in the asset. It may begin with the purchase price and acquisition costs, then change over time. Adjustments can include:

• purchase commissions and acquisition fees;
• reinvested dividends or mutual-fund distributions;
• capital improvements to real estate;
• certain legal and transactional costs;
• depreciation and other deductions;
• basis received from a gift or inheritance;
• partnership, corporate, or pass-through adjustments; and
• basis adjustments from tax-free exchanges.

A broker’s reported basis is useful but not always complete. It may be missing or wrong for older securities, noncovered lots, transferred accounts, inherited property, gifts, employee stock, reinvested distributions, options, partnership interests, and digital assets. You remain responsible for correcting the return. IRS Publication 551 and the Form 8949 instructions explain basis and reporting adjustments.

Worked basis example

You buy shares for $10,000 and pay $100 in purchase costs. You later sell them for $16,000 and pay $100 in selling costs:

Amount realized: $16,000 − $100 = $15,900
Adjusted basis:  $10,000 + $100 = $10,100
Realized gain:   $15,900 − $10,100 = $5,800

The $5,800 is the realized gain. Whether it is short-term or long-term, and how much tax applies, depends on the holding period, your other income, losses, and special rules.

Short-term versus long-term gains

For most assets, holding the asset for one year or less produces a short-term gain or loss. Holding it for more than one year generally produces a long-term gain or loss.

The holding period generally begins the day after acquisition and includes the disposition date. For example, shares purchased on January 31, 2025, and sold on January 29, 2026, are generally short-term. A sale on February 6, 2026, is generally long-term. Publication 550 describes the general holding-period rules.

Special holding-period rules can apply to:

• inherited property, which is generally treated as long-term when sold;
• gifted property, where the donor’s holding period may carry over;
• stock received in a tax-free reorganization;
• restricted stock, RSUs, and employee stock options;
• mutual-fund shares and reinvested distributions;
• short sales;
• straddles and hedging transactions;
• partnership interests and carried interests; and
• Section 1256 contracts, which have their own 60% long-term and 40% short-term treatment.

Holding for more than one year can lower the federal rate, but waiting solely for the tax result has trade-offs: the asset price may fall, a distribution may occur, liquidity may be lost, and concentration risk may increase.

How the 2026 federal rate calculation works

Most long-term gains

Most net long-term gains are commonly called “other gain” and generally use the 0%, 15%, and 20% rate structure. The applicable rate depends on where the gain falls after taxable income is calculated and after the relevant capital-loss netting.

A 0% result does not mean the gain disappears from the return. It still affects taxable income and may affect credits, deductions, state tax, NIIT, or other calculations.

Special maximum rates

• 28%: collectibles gain and certain qualified small-business stock gain that remains taxable after an available Section 1202 exclusion.
• 25%: unrecaptured Section 1250 gain, generally the depreciation-related portion of gain from certain depreciable real property.
• Ordinary rates: short-term gains, depreciation recapture, compensation income from equity awards, and other amounts recharacterized as ordinary income.

Qualified dividends generally use the same 0%, 15%, and 20% rate structure, but they are dividends, not capital gains. Do not treat the two categories as interchangeable. IRS Publication 550.

Net Investment Income Tax

The 3.8% Net Investment Income Tax may apply to individuals, estates, and trusts with investment income above the applicable modified-adjusted-gross-income threshold. The tax is imposed on the lesser of net investment income or the excess of modified AGI over:

Filing status	NIIT threshold
Single or head of household	$200,000
Married filing jointly or qualifying surviving spouse	$250,000
Married filing separately	$125,000

NIIT is separate from regular income tax. A typical 20% long-term gain subject to NIIT can therefore face 23.8% federal tax before state tax. Active business income may be treated differently from passive investment income, so business owners should not assume every business gain is subject to NIIT. IRS Publication 505.

Capital-loss netting and the $3,000 limit

You generally cannot calculate tax by applying a rate to every profitable sale independently. Gains and losses must be combined in the required order:

1. Net short-term gains and losses against one another.
2. Net long-term gains and losses against one another.
3. Combine the resulting short-term and long-term amounts.
4. Apply the applicable rate to the resulting net gains.
5. If the final result is a net loss, deduct it against other income subject to the annual limit.

For individuals, the annual deduction for a net capital loss against other income is generally $3,000, or $1,500 for married taxpayers filing separately. Unused losses generally carry forward indefinitely until used. The short-term or long-term character of a carryover remains relevant in future netting.

Example: long-term gain plus short-term loss

You have a $20,000 long-term stock gain and an $8,000 short-term stock loss. After netting, the result is a $12,000 net long-term gain. The tax rate is determined from that net result and your taxable-income position—not by taxing the $20,000 gain and $8,000 loss separately.

Tax-loss harvesting

Realizing a loss can offset gains and, subject to the annual limit, ordinary income. But tax-loss harvesting can fail when:

• you buy substantially identical stock or securities during the wash-sale period;
• a spouse or another account makes the replacement purchase;
• you rely only on a broker’s adjustment;
• you select the wrong tax lot or basis;
• you overlook a prior-year carryforward; or
• you create a short-term loss while retaining a long-term position with a different investment objective.

Wash-sale rules

A loss from selling stock or securities is generally disallowed when you acquire substantially identical stock or securities during the period beginning 30 days before and ending 30 days after the sale. The disallowed loss is generally added to the basis of the replacement property, postponing the loss rather than permanently eliminating it.

Report an applicable wash-sale adjustment on Form 8949 using adjustment code W. Broker reporting may not capture purchases in other accounts, transfers, options, spouse transactions, or every noncovered security. Digital-asset wash-sale treatment should not be stated categorically without checking current law and guidance; digital assets have different statutory and reporting treatment from traditional stock and securities. Publication 550 and the Form 1099-B instructions.

Basis rules that commonly change the answer

Stocks, ETFs, and mutual funds

Keep records of purchase price, commissions, reinvested distributions, stock splits, mergers, spin-offs, and transferred lots. Reinvested dividends can increase basis even though no cash was received.

A mutual fund can distribute a capital gain even when you did not sell your shares. The fund may sell investments at a gain and pass that gain through to shareholders. Capital-gain distributions shown in Form 1099-DIV box 2a are generally treated as long-term capital gains regardless of how long you owned the fund shares. IRS mutual-fund distribution guidance.

Buying a fund just before its distribution date can create an unpleasant tax result: you may receive a taxable distribution while the fund’s share price falls by approximately the distribution amount. Compare the distribution schedule and after-tax return before buying solely for a year-end position.

Inherited property

Inherited property generally receives a basis equal to its fair market value on the decedent’s date of death. An alternate valuation date may apply when the estate properly elects it. This often removes lifetime appreciation from the heir’s taxable gain, but post-death appreciation can be taxable when the heir sells.

Do not assume every inherited asset receives an automatic “step-up.” Community-property rules, trusts, estate-tax elections, special-use valuation, property transferred shortly before death, and estate records can change the result. Obtain the valuation, estate documents, and, where relevant, Form 706 information. IRS gifts and inheritances guidance and Publication 551.

Example: An heir receives stock with a date-of-death basis of $80,000 and sells it for $92,000 after $2,000 of selling costs. The realized gain is $10,000. The inherited holding period generally produces long-term treatment.

Gifted property

Gifted property generally carries over the donor’s adjusted basis. If the property’s fair market value on the gift date is lower than the donor’s basis, dual-basis rules can apply: one basis may govern a later gain and another a later loss. Obtain the donor’s basis, gift-date fair market value, gift-tax information, holding period, and improvement records before selling.

Real estate improvements and depreciation

For real estate, basis may include qualifying improvements such as additions, renovations, and certain capitalized costs. Routine repairs generally do not increase basis. Depreciation claimed or allowable generally reduces basis even if the taxpayer failed to claim it.

Primary-home sales

A qualifying taxpayer may exclude up to $250,000 of gain when filing individually or up to $500,000 when filing jointly. The general ownership-and-use test requires the taxpayer to have owned and used the home as a main residence for at least two years during the five-year period ending on the sale date.

The exclusion applies to qualifying gain, not sale proceeds. A personal residence sold at a loss generally does not produce a deductible capital loss.

Example: You bought a home for $300,000, made $50,000 of qualifying improvements, and sell it for $700,000 after $35,000 of selling costs:

Amount realized: $700,000 − $35,000 = $665,000
Adjusted basis:  $300,000 + $50,000 = $350,000
Gain:           $665,000 − $350,000 = $315,000

If you are single and otherwise qualify for the full exclusion, up to $250,000 may be excluded and approximately $65,000 may remain taxable before other adjustments. Rental use, depreciation, nonqualified use, prior exclusions, partial exclusions, separate ownership, filing status, and other facts can change the result. Receiving Form 1099-S does not by itself mean the entire sale is taxable. IRS home-sale guidance.

Real estate, rental property, and depreciation recapture

A rental or business-property sale is rarely a simple 0%, 15%, or 20% calculation. It may produce:

• ordinary income from depreciation recapture, depending on the property and depreciation method;
• unrecaptured Section 1250 gain, generally subject to a maximum 25% rate;
• remaining long-term capital or Section 1231 gain;
• state tax; and
• potential NIIT.

Example: A rental property has a $300,000 original basis, $80,000 of accumulated depreciation, and an adjusted basis of $220,000. It sells for $500,000 after $20,000 of selling costs, producing $260,000 of total gain. The depreciation-related portion and the remaining gain may be taxed under different rules. The exact allocation requires the depreciation schedules and property history.

Section 1031 like-kind exchanges

A properly structured Section 1031 exchange can generally defer recognition of gain when business or investment real property is exchanged for qualifying like-kind real property. Current federal Section 1031 treatment generally applies to real property, not stocks, bonds, vehicles, artwork, collectibles, patents, or other personal or intangible property. Property held primarily for sale to customers does not qualify.

Cash or other non-like-kind property received—often called “boot”—can trigger recognized gain. A 1031 exchange generally defers recognition; it does not automatically eliminate the gain. Deadlines, qualified intermediaries, identification rules, constructive receipt, related parties, and Form 8824 reporting matter. IRS like-kind exchange guidance.

Installment sales

An eligible installment sale can spread recognition of qualifying gain across the years payments are received instead of recognizing all eligible gain immediately. The taxable portion of each payment is generally determined using the gross-profit percentage.

Depreciation recapture is generally recognized in the year of sale, even when the buyer pays over time. Interest included in an installment obligation is generally ordinary income, not capital gain. Use Publication 537 and Form 6252, and obtain professional advice for related-party sales or large business transactions.

Charitable gifts of appreciated property

Donating appreciated long-term capital-gain property directly to a qualified charity may allow a deduction based on the property’s fair market value while avoiding realization of the embedded gain. This is not the same as selling the asset, paying tax on the gain, and donating cash.

The result depends on the charity, holding period, type and use of the property, valuation, substantiation, income limitations, and other rules. Form 8283 may be required for noncash contributions exceeding $500. The deduction is not automatic for every appreciated asset, private foundation, or unrelated-use contribution. IRS Form 8283 instructions.

Qualified small-business stock: important 2026 change

Section 1202 can provide a substantial federal exclusion for eligible qualified small-business stock, but private-company stock is not automatically QSBS.

For qualifying stock acquired after July 4, 2025, the 2025 federal law created a tiered holding-period regime:

• 50% exclusion after at least three years;
• 75% exclusion after at least four years; and
• 100% exclusion after at least five years.

For qualifying post-enactment stock, the law also provides a $15 million per-issuer dollar limitation subject to statutory rules and increases the gross-assets threshold from $50 million to $75 million for stock issued after enactment. Older QSBS generally remains subject to the earlier five-year and exclusion rules. Public Law 119-21.

Eligibility involves original issuance, corporation type, gross assets, active-business tests, excluded industries, redemption rules, holding periods, and the specific stock issuance. A founder or employee should preserve subscription agreements, capitalization records, valuation documents, corporate representations, and acquisition dates. QSBS review is especially important before a sale, because a missed eligibility requirement can change millions of dollars of expected tax treatment.

Opportunity Zones in 2026

Opportunity Zone rules changed under the 2025 federal law, and 2026 is a transition year. Earlier investments can involve a deferred gain with an inclusion date tied to December 31, 2026 or an earlier inclusion event. The revised framework changes the treatment of investments made after 2026, designation periods, basis adjustments, rural opportunity funds, and other details.

Do not rely on the older shorthand that all deferred gain universally becomes taxable on December 31, 2026. The correct result depends on when the gain was realized, when the investment was made, which Opportunity Zone rules apply, and whether an inclusion event occurred. Current IRS transitional guidance is in Notice 2026-40 and the IRS Opportunity Zone guidance.

Opportunity Zones can offer deferral and potentially favorable treatment for later appreciation, but they also involve illiquidity, project and sponsor risk, compliance requirements, inclusion events, reporting, and possible state nonconformity. A tax benefit does not make a poor investment suitable.

Crypto and digital assets

For an investment digital asset, the basic capital-gain calculation is the same property formula:

Fair market value received at disposition
− adjusted basis in the digital asset disposed
− eligible transaction costs
= gain or loss

Taxable dispositions can include:

• selling crypto for U.S. dollars;
• exchanging one coin or token for another;
• using crypto to pay for goods or services;
• selling or transferring an NFT;
• certain mining, staking, airdrop, or reward activity; and
• disposing of assets received through services or business activity.

Staking, mining, rewards, and airdrops can involve income when received, followed by capital gain or loss when the asset is later disposed of. The correct basis and income timing depend on the facts. Fees must be assigned to the relevant transaction, and transfers between your own wallets should be documented as transfers rather than sales.

For 2026 transactions, brokers generally report digital-asset proceeds on Form 1099-DA. Basis reporting depends on whether the asset is a covered or noncovered security, and some optional reporting methods apply to qualifying stablecoins and specified NFTs. Form 1099-DA does not replace your own basis records. The IRS says taxpayers must calculate basis using their records and report the income even when the form is incomplete or incorrect. 2026 Form 1099-DA instructions and IRS Form 1099-DA explanation.

Example: You exchange bitcoin with a $4,000 basis for ether worth $9,000 and incur $100 of eligible transaction costs. The illustrative gain is $4,900. The exchange is taxable even though you received no dollars.

Employee stock compensation

Equity compensation must be divided into its compensation-income stage and its later investment gain or loss. The relevant categories include:

• restricted stock;
• restricted stock units;
• nonqualified stock options;
• incentive stock options; and
• employee stock purchase plans.

The capital-gain period generally begins after the compensation-income event. For example, with an RSU, the shares’ value at vesting is generally included in wages; later appreciation or decline is generally measured from the basis established at vesting. With stock options, exercise or sale timing can create wage income, capital gain, or alternative minimum tax issues.

A common error is to calculate the entire appreciation from the original grant price as capital gain while ignoring wage income already reported at vesting or exercise. Review Forms W-2, 3921, and 3922, grant documents, exercise confirmations, withholding, and lot-level basis. IRS Topic 427.

Retirement accounts

Investment trades inside a traditional IRA generally do not create a current capital-gains tax transaction each time an investment is sold inside the account. Tax is generally imposed when taxable distributions are taken, subject to the account and distribution rules.

Qualified Roth IRA distributions are generally tax-free, but contribution, conversion, ordering, age, five-year, inherited-account, and distribution rules still matter. A retirement account does not simply “avoid capital-gains tax”; it changes the timing and, in traditional accounts, generally the character of taxation. IRS traditional IRA guidance.

Ten practical examples

1. Long-term gain with a capital loss

A $20,000 long-term gain and an $8,000 short-term loss produce a $12,000 net long-term gain after required netting, assuming no other capital transactions.

2. Short-term stock gain

You buy shares for $5,000 and sell them nine months later for $8,000 after $50 of selling costs. The $2,950 gain is short-term and is included in ordinary taxable income.

3. A gain crossing the 0% threshold

A single taxpayer has $45,000 of taxable income before a $10,000 net long-term gain. Assuming the gain is otherwise eligible for the normal rate structure, the first $4,450 falls within the 0% band and the remaining $5,550 falls in the 15% band. Other tax items can change the actual calculation.

4. Mutual-fund distribution without a sale

You buy a fund before its distribution date and receive a $2,000 capital-gain distribution shown in Form 1099-DIV box 2a. You may owe tax on that long-term capital-gain distribution even though you did not sell fund shares.

5. Inherited stock

An inherited lot has a date-of-death basis of $80,000. It sells for $92,000 after $2,000 of selling costs, producing a $10,000 gain. The inherited holding period generally results in long-term treatment.

6. Sale of a qualifying primary home

A home with a $350,000 adjusted basis sells for $665,000 after selling costs, producing $315,000 of gain. A qualifying single taxpayer may exclude up to $250,000, leaving approximately $65,000 potentially taxable before special adjustments.

7. Rental property

A rental with a $220,000 adjusted basis sells for $480,000 after selling costs, producing $260,000 of gain. Depreciation-related gain and the remaining gain can have different rates and reporting.

8. Crypto-to-crypto exchange

Bitcoin with a $4,000 basis is exchanged for ether worth $9,000, with $100 of eligible transaction costs. The illustrative realized gain is $4,900.

9. Wash sale

You sell shares for a $2,000 loss and buy substantially identical shares 10 days later. The loss is generally disallowed for now and added to the replacement shares’ basis.

10. Large gain and estimated tax

A large sale increases your expected federal tax substantially. Compare withholding and estimated payments with the smaller of 90% of expected 2026 tax or 100% of 2025 tax; use 110% of 2025 tax for higher-income taxpayers. This safe-harbor test does not calculate the final tax bill, and state tax and NIIT may require additional payment.

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How to report capital gains on your tax return

Step 1: Gather records

• purchase and sale confirmations;
• Forms 1099-B and 1099-DA;
• Form 1099-DIV for fund distributions;
• Form 1099-S for reportable real-estate sales;
• Forms 3921 and 3922 for applicable employee-stock transactions;
• grant, vesting, exercise, and withholding records;
• inherited-property valuations and estate documents;
• gift-basis records;
• real-estate improvement and depreciation records; and
• Schedule K-1 forms and partnership basis information.

A missing Form 1099-B, 1099-DA, or 1099-S does not necessarily mean the transaction is not taxable. Capital-asset transactions generally must be reported when required, even without an information return. Form 8949 instructions.

Step 2: Calculate each lot

For every transaction, determine the amount realized, selling costs, adjusted basis, acquisition date, disposition date, and any adjustment such as a wash sale.

Step 3: Classify the transaction

Identify whether it is short-term, long-term, collectible gain, unrecaptured Section 1250 gain, QSBS gain, ordinary income, Section 1231 gain, installment-sale gain, like-kind exchange, wash-sale adjustment, or a digital-asset disposition.

Step 4: Complete the forms

Form or schedule	Typical use
Form 8949	Most sales and exchanges of capital assets
Schedule D	Summarizes capital gains, losses, distributions, and carryovers
Form 4797	Many sales of business property
Form 6252	Installment sales
Form 8824	Like-kind exchanges
Form 6781	Section 1256 contracts and straddles
Form 8997	Applicable Opportunity Zone investments
Form 8283	Qualifying noncash charitable contributions
Form 6251	Potential alternative minimum tax, including some ISO situations

For 2026 broker statements, Form 1099-B and Form 1099-DA may separate transactions by short-term or long-term status and by whether basis was reported. The 2026 Form 1099-DA instructions identify Form 8949 boxes G, H, J, and K for applicable digital-asset categories. Check the current statement and instructions rather than copying an older form workflow. 2026 broker-reporting guidance.

Step 5: Apply the tax worksheets

Use the Qualified Dividends and Capital Gain Tax Worksheet or Schedule D Tax Worksheet when required. The Schedule D worksheet is especially important when the return includes 28% rate gain or unrecaptured Section 1250 gain. Schedule D instructions.

Estimated taxes after a large gain

A sale can create an underpayment penalty even if you pay the remaining balance with your annual return. For many taxpayers, the federal estimated-tax safe harbor is the smaller of:

• 90% of current-year tax; or
• 100% of prior-year tax, increased to 110% when the prior-year AGI exceeds the applicable higher-income threshold.

You generally must also expect to owe at least $1,000 after withholding and refundable credits before estimated payments are required. Withholding from wages can sometimes be increased after a gain by updating Form W-4. Other taxpayers may need Form 1040-ES payments. NIIT should be included in the estimated-tax calculation where applicable. IRS large-gain estimated-tax guidance and 2026 Form 1040-ES.

State capital-gains taxes

Federal rates are only part of the answer. Most states with broad individual income taxes generally include capital gains in the ordinary state income-tax base, although states may offer exclusions, deductions, preferential rates, or special treatment. State rules can diverge from federal rules for capital-loss carryovers, QSBS, Opportunity Zones, Section 1031 exchanges, home-sale exclusions, depreciation, digital assets, residency, and nonresident sourcing. Tax Foundation 2026 state income-tax overview.

Washington

Washington has no broad wage-based individual income tax but does impose a separate long-term capital-gains tax. The state’s rates, standard deduction, exemptions, and thresholds should be checked for the applicable 2026 tax year rather than copied from a 2025 summary. Washington Department of Revenue capital-gains tax.

Missouri

Missouri’s current Department of Revenue FAQ says eligible individuals may subtract 100% of federally reported capital gains for tax years beginning on or after January 1, 2026, first claimed on a 2026 return filed in 2027. The subtraction is claimed on Form MO-A and does not apply to capital losses. Because another official Missouri page has described a different effective date, check the current Missouri forms and instructions before filing. Missouri capital-gains subtraction FAQ.

New Hampshire

New Hampshire repealed its Interest and Dividends Tax for tax periods beginning after December 31, 2024. That tax was not a broad capital-gains tax, so the repeal should not be described as a general capital-gains-tax repeal. New Hampshire Department of Revenue.

Reduce, exclude, or defer: legitimate planning options

Reduce the rate

• Hold an asset long enough to qualify for long-term treatment when the investment risk is acceptable.
• Realize gains in a lower-income year when more gain may fit within the 0% or 15% band.
• Harvest legitimate losses while monitoring wash-sale rules and investment exposure.
• Use tax-advantaged retirement accounts for future investing when contribution and distribution rules fit your plan.

Exclude gain

• Use the Section 121 home-sale exclusion when the ownership and use requirements are met.
• Donate qualifying appreciated long-term property directly to charity, subject to deduction and substantiation rules.
• Evaluate QSBS only after confirming every Section 1202 requirement and limitation.

Defer gain

• Use a properly structured Section 1031 exchange for qualifying investment or business real property.
• Use an eligible installment sale, remembering that depreciation recapture and interest may be taxed immediately or separately.
• Consider Opportunity Zone investments only after reviewing the applicable pre-2027 or post-2026 rules, inclusion events, liquidity, and investment risk.

Tax deferral is not tax elimination. A strategy that saves tax but creates excessive investment risk, concentration, fees, or illiquidity may leave you worse off financially.

Common mistakes

• Applying 15% to every capital gain without checking holding period, taxable-income stacking, NIIT, and state tax.
• Confusing a $500,000 sale price with a $500,000 taxable gain.
• Using a broker’s basis without checking old, transferred, inherited, gifted, or employee-stock lots.
• Calculating tax sale by sale instead of netting short-term and long-term gains and losses.
• Assuming a mutual-fund distribution requires a sale of fund shares.
• Ignoring depreciation recapture and Section 1250 gain on rental property.
• Assuming Form 1099-B or Form 1099-DA is complete and authoritative.
• Calling a 1031 exchange, retirement account, installment sale, or Opportunity Zone an automatic tax exemption.
• Assuming inherited property always receives the same basis treatment.
• Assuming every private-company share is QSBS.
• Assuming crypto-to-crypto exchanges are tax-free.
• Forgetting estimated-tax payments after a large sale.

When to get professional advice

Professional review is especially worthwhile for:

• business or partnership-interest sales;
• QSBS eligibility;
• inherited or gifted property with missing basis records;
• trusts, estates, or pass-through entities;
• installment sales;
• Section 1031 exchanges;
• Opportunity Zone investments;
• employee stock options, ISO exercises, or AMT;
• multistate residency or nonresident filing;
• large gains near the 20% or NIIT thresholds; and
• crypto activity involving staking, mining, airdrops, NFTs, multiple exchanges, or incomplete records.

A tax professional cannot make an ineligible transaction qualify, but can help identify the correct basis, character, forms, payment schedule, and state treatment before a filing error becomes expensive.

Frequently Asked Questions

Do I owe capital-gains tax if I do not withdraw cash?

Usually no. A gain is generally recognized when you sell, exchange, or otherwise dispose of the asset. However, mutual-fund capital-gain distributions, crypto payments, option events, constructive sales, and other special transactions can create taxable income without a conventional cash sale.

How long must I hold an asset for long-term capital-gains treatment?

For most assets, holding them for more than one year generally qualifies the gain for the 0%, 15%, or 20% federal long-term rate structure. The actual rate depends on taxable income and filing status, and NIIT and state tax may also apply.

Is capital-gains tax based on the sale price?

The taxable gain is generally the amount realized minus adjusted basis and eligible selling costs. A $500,000 sale price is not automatically a $500,000 taxable gain.

How much capital loss can I deduct?

A net capital loss generally offsets capital gains first. If losses exceed gains, individuals can generally deduct up to $3,000 against other income each year, or $1,500 if married filing separately, with unused losses carried forward.

How much home-sale gain can be excluded?

A qualifying individual may exclude up to $250,000 of gain when filing individually or $500,000 when filing jointly, generally after owning and using the home as a main residence for at least two of the five years before sale. Rental use, depreciation, prior exclusions, and other facts can reduce or change the exclusion.

Is a crypto-to-crypto exchange taxable?

Generally, yes. Trading one digital asset for another is usually a taxable disposition because digital assets are treated as property for federal tax purposes. You must determine the fair market value received and the basis of the asset disposed.

Which forms report capital gains?

Form 8949 generally reports individual sales and exchanges, while Schedule D summarizes capital gains and losses. Depending on the transaction, you may also need Forms 4797, 6252, 8824, 8997, 8283, or 6251.

Does a 1031 exchange eliminate capital-gains tax?

Not necessarily. A 1031 exchange generally defers eligible gain on qualifying business or investment real property; it does not automatically eliminate the gain. Boot, deadlines, identification rules, and reporting requirements apply.

The Bottom Line

To estimate capital-gains tax for 2026, calculate amount realized minus adjusted basis, classify the result as short-term or long-term, net all gains and losses, then apply the applicable federal worksheet, NIIT, and state rules. The most important records are basis, holding period, transaction costs, prior losses, and any special facts involving real estate, gifts, inheritances, crypto, business property, or employee equity.

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