You sold a stock at a profit. How much goes to the IRS? The answer hinges on one question: did you hold it more than a year? That single day can cost — or save — you thousands.
- Rate: 0%
- Federal: $0
- NIIT (3.8%): $0
- Net after tax: $0
- Rate: 0% (ordinary income)
- Federal: $0
- NIIT (3.8%): $0
- Net after tax: $0
- Gain: $0
- Losses used: $0
- Hold past 1 year to get the lower rate
2026 federal rates (IRS Rev. Proc. 2025-32). State capital gains tax is not included — it can add up to 13.3% (California). Estimates only; your actual liability depends on your full tax picture. Consult a tax professional.
One year is everything
The whole game. Hold a stock more than one year and your gain qualifies for the preferential rate: 0%, 15%, or 20%. Sell at 364 days and it's ordinary income — up to 37%. Same profit, wildly different tax.
2026 long-term capital gains brackets
| Rate | Single | Married filing jointly |
|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | $49,451 – $545,500 | $98,901 – $613,700 |
| 20% | Over $545,500 | Over $613,700 |
Note: these brackets are based on your taxable income (income after deductions), and long-term gains stack on top of your ordinary income.
The 0% bracket is real — and underused. If your total taxable income (including the gain) stays under $49,450 (single), you pay zero federal capital gains tax. Retirees, people between jobs, and low-income years are prime opportunities.
Don't forget the NIIT
High earners owe an extra 3.8% Net Investment Income Tax on top.
- Kicks in when MAGI exceeds $200,000 (single) or $250,000 (married)
- Applies to both short-term and long-term gains
- Brings the top long-term rate to 23.8% and the top short-term rate to 40.8%
Ways to legally reduce the bill
① Wait past the one-year mark
The simplest and biggest lever. A $50,000 gain in the 22% bracket can cost $4,000+ more if you sell a few weeks early. Check your purchase date before you hit sell.
② Tax-loss harvesting
Sell losing positions to offset your gains. Losses first offset gains of the same type, then the other type. If losses exceed gains, you can deduct up to $3,000/year against ordinary income and carry the rest forward.
⚠️ The wash sale rule. If you buy the same or substantially identical security within 30 days (before or after) the loss sale, the loss is disallowed. You can't sell for the tax loss and immediately buy back. (Note: as of 2026 this rule does not apply to crypto.)
③ Use the 0% bracket in low-income years
Between jobs? Early retirement? Sabbatical? Those are the years to realize gains at 0%. You can even sell and immediately rebuy to step up your cost basis — the wash sale rule only applies to losses, not gains.
④ Hold in tax-advantaged accounts
Gains inside an IRA or 401(k) aren't taxed as they occur. In a Roth, qualified withdrawals are tax-free entirely.
⑤ Spread sales across tax years
A large gain can push you into a higher bracket. Splitting a sale across December and January may keep you in a lower band both years.
Things people get wrong
- ❌ "Unrealized gains are taxed" — No. You owe nothing until you sell. A stock that triples but you never sell is not a taxable event.
- ❌ "Exactly one year counts as long-term" — No. You need more than one year. One year and one day.
- ❌ "All my gain is taxed at one rate" — No. The gain stacks on your income and can span multiple brackets.
- ❌ "Dividends are ordinary income" — Qualified dividends get the same preferential 0/15/20% rates.
Don't forget state tax
Most states tax capital gains as ordinary income. California can add 13.3%. Nine states have no income tax at all — though Washington has a dedicated 7% tax on large long-term gains.
The most valuable thing you can do is check the purchase date before selling. Waiting a few extra days to cross the one-year line can save thousands — for doing nothing at all.
Estimates using 2026 federal rates (IRS Rev. Proc. 2025-32). State capital gains tax is not included. Your actual liability depends on your full tax situation, other investment income, and deductions. This is general information, not tax or investment advice — consult a qualified tax professional.