You sold a stock or a property at a profit. How much goes to the IRS? It turns on one question: did you hold it more than a year? A single day can more than double the rate.
1. How much is at stake. It turns on one question — did you hold it more than a year? The IRS writes it as “more than one year” for long-term and “one year or less” for short-term. Short-term gains get no preference and are taxed at ordinary rates — a single day can more than double the rate.
2. What is the risk. Long-term is not the end of it — high earners pay another 3.8% in net investment income tax. And selling a home follows its own rule.
3. So what do I do. Check the acquisition date before you sell. If you are days short of a year, those days set the rate. Ordinary rates are in our 2026 bracket article. This assumes a US tax resident.
Why does one year decide everything
IRS Topic 409 states the test:
“Generally, if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.”
And short-term gains get no preference: “Net short-term capital gains are subject to taxation as ordinary income at graduated tax rates.” Those graduated rates are laid out in the 2026 federal brackets.
| Type | Holding period | Rate |
|---|---|---|
| Short-term | One year or less | Ordinary rates (up to 37%) |
| Long-term | More than one year | 0% · 15% · 20% |
Read “more than one year” carefully. Exactly one year is short-term. Selling on the first anniversary of purchase does not qualify.
What is the long-term rate
| Filing status | Maximum zero rate | Maximum 15% rate |
|---|---|---|
| Married filing jointly / surviving spouse | $98,900 | $613,700 |
| Head of household | $66,200 | $579,600 |
| All other individuals | $49,450 | $545,500 |
| Married filing separately | $49,450 | $306,850 |
| Estates and trusts | $3,300 | $16,250 |
The first row is the one that matters most. A married couple pays 0% on long-term gains up to $98,900 of taxable income. That is where deliberate gain-harvesting in a low-income year — just after retiring, say — comes from.
Note that these thresholds are measured against total taxable income, not the size of the gain. If salary already fills the bracket, there is no 0% room left.
What do high earners pay on top
IRS Topic 559 sets out the net investment income tax:
“A 3.8 percent net investment income tax (NIIT) applies to individuals, estates, and trusts that have net investment income above applicable threshold amounts.”
The thresholds are $250,000 for married filing jointly or a qualifying surviving spouse, $125,000 for married filing separately, and $200,000 for single or head of household. It applies to the lesser of net investment income or the excess of modified adjusted gross income over the threshold.
These amounts carry no year label on the page. They are fixed in statute rather than indexed, which is why they do not appear in the 2026 inflation procedure at all. Treat them as fixed thresholds, not as “2026 figures”.
So at the top the effective rate becomes 20% + 3.8% = 23.8%. You can also sit in the 15% band and still cross the NIIT threshold — the two lines are set independently.
| Filing status | NIIT threshold (MAGI) | 20% capital gains starts above |
|---|---|---|
| Married filing jointly / surviving spouse | $250,000 | $613,700 |
| Single / head of household | $200,000 | $545,500 / $579,600 |
| Married filing separately | $125,000 | $306,850 |
Look at the gap between the two columns. The NIIT line sits far lower. The extra 3.8% starts biting long before the 20% rate does.
Is selling a home the same
If you sold your main home, the exclusion in IRS Topic 701 may apply:
“you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse.”
Two tests apply, both phrased as “24 months (2 years) out of the last 5 years”:
- Ownership — “owned the home for at least 24 months (2 years) out of the last 5 years leading up to the date of the sale”
- Use — “owned the home and used it as a residence for at least 24 months (2 years) of the previous 5 years”
It is two years in total within five, not five continuous years — a distinction that matters if you rented the place out for a while. For the wider housing picture see the US mortgage guide and US property tax.
This is commonly called the “Section 121 exclusion”, but the phrase “Section 121” does not appear on the IRS page itself. It is a nickname.
Three places this actually goes wrong
- Selling days short of a year — the rate jumps from 0–20% to as much as 37%. Keep your purchase dates.
- Realising everything in one year — taxable income can leave the 0% band or cross the NIIT threshold.
- Letting a low-income year pass unused — the year after retiring, or a gap between jobs, is when the 0% band is available.
To plan alongside retirement income, see 401(k) and when to claim Social Security. For growth projections, the compound interest calculator.
Questions people ask
What about losses?
Losses offset gains under specific rules. But we could not verify the annual deduction cap and carryover against the source, so no figures are given here. Check IRS Topic 409.
If my rate is 0%, do I still have to report?
A 0% rate and a filing obligation are separate questions. Filing requirements are not covered here.
What about dividends?
Qualified dividends are widely understood to use the same brackets, but we could not verify that against the source this time. The table above is for capital gains.
I am a Korean resident selling US stock.
Which rules apply depends entirely on your tax residence. This article assumes a US tax resident; Korean residents fall under a different regime for overseas share disposals.
When do I use the 2026 table?
For gains realised in 2026, filed in early 2027.
Where to check further
- When the holding period starts counting. The IRS stops at “more than one year”; how the acquisition date is counted varies by asset and transaction type — read IRS Publication 550 alongside the acquisition date on your broker statement.
- How your state taxes capital gains. This covers federal tax only — some states tax gains as ordinary income. Check your state's Department of Revenue.
- Loss harvesting and the wash sale rule. Outside the scope here — the wash sale section of IRS Publication 550 and a tax professional cover it.
Sources and where to check
- Internal Revenue Service — Rev. Proc. 2025-32, §4.03 Maximum Capital Gains Rate. Primary source for every zero-rate and 15%-rate ceiling, scoped to “taxable years beginning in 2026”.
- Internal Revenue Service — Topic no. 409, Capital gains and losses. Source of the more-than-one-year test and the ordinary-rate treatment of short-term gains.
- Internal Revenue Service — Topic no. 559, Net investment income tax. Source of the 3.8% rate and the $250,000 / $125,000 / $200,000 thresholds.
- Internal Revenue Service — Topic no. 701, Sale of your home. Source of the $250,000 / $500,000 exclusion and the 24-months-in-5-years ownership and use tests.
Written as of July 2026. The zero-rate and 15% ceilings, the holding-period test, the treatment of short-term gains, the 3.8% NIIT and its thresholds, and the home-sale exclusion and tests all come from the sources above, and each table was read twice and the values matched. Four things could not be verified: (1) the annual capital-loss deduction cap and carryover; (2) whether qualified dividends use the same brackets; (3) filing-requirement thresholds; and (4) the “Page Last Reviewed” dates on IRS pages, which differed between reads and were not relied on. Note also that the general IRS guidance page (Topic 409) still carries 2025 thresholds, so the 2026 figures were taken only from the revenue procedure. Outcomes vary widely with your income mix; this is not tax or investment advice.
