Short-Term vs Long-Term Capital Gains Tax Rates

Short-term capital gains — on assets held one year or less — are taxed at your ordinary income rates, from 10% to 37% in 2026. Long-term gains, on assets held more than one year, are taxed at 0%, 15%, or 20% depending on your taxable income. For a single filer with $120,000 of taxable income, waiting past the one-year mark cuts the federal tax on a $20,000 gain from $4,800 to $3,000.

To estimate the tax on a specific sale, use the capital gains calculator.

How the holding period is counted

IRS Topic 409 defines the line: hold an asset more than one year and the gain or loss is long-term; one year or less and it is short-term. Start counting on the day after you acquired the asset and include the day you sold it.

Special cases:

• Inherited property: always long-term, no matter how briefly anyone held it.
• Gifts: if you take the donor's basis, you also add the donor's holding period to yours.
• Shares bought at different times: each lot has its own date. Tell your broker which lot to sell; otherwise it usually defaults to first-in, first-out.
• Mutual fund capital gain distributions (Form 1099-DIV, box 2a) are long-term regardless of how long you owned the fund, per Publication 550.

2026 ordinary income brackets (short-term gains)

Short-term gains are added to wages and other ordinary income and taxed at these 2026 rates on taxable income:

2026 long-term capital gains brackets

From Rev. Proc. 2025-32, applied to taxable income including the gain:

Long-term gains "stack" on top of ordinary income. Your wages fill the brackets first, and the gain occupies the space above them. That is why the same gain can be taxed partly at 0% and partly at 15%.

Side-by-side: the same gain, short-term vs. long-term

Each row adds a gain to a given amount of other taxable income (after the 2026 standard deduction of $16,100 single or $32,200 joint), using the brackets above.

How two of these work:

• Single, $30,000 of income: the 0% bracket runs to $49,450, so $19,450 of the long-term gain is tax-free and the remaining $550 is taxed at 15% ($83). As a short-term gain, all $20,000 falls in the 12% bracket ($2,400).
• Married, $90,000 of income: the long-term gain fills the 0% band to $98,900 ($8,900 tax-free) and the remaining $11,100 is taxed at 15% ($1,665). Short-term, $10,800 is taxed at 12% and $9,200 at 22% ($3,320).

NIIT applies the same way to short- and long-term gains, so it does not change the savings from waiting.

The 3.8% net investment income tax

IRS Topic 559 imposes a 3.8% tax on the lesser of your net investment income or the amount your modified AGI exceeds $200,000 (single or head of household), $250,000 (married filing jointly), or $125,000 (married filing separately). Capital gains, dividends, interest, and rents count. That makes the top federal rate 23.8% on long-term gains and 40.8% on short-term gains. Figure it on Form 8960, or estimate it with the NIIT calculator.

Gains taxed at other long-term rates

Topic 409 lists three exceptions to the 0/15/20% structure:

The real estate rule matters most for landlords; our guide to capital gains tax on real estate works through a rental sale with depreciation recapture. Qualified small business stock can be partly or fully excluded under section 1202 if you meet its holding period and issuer tests, and only the non-excluded part is taxed at the 28% rate.

How gains and losses are netted

You do not pay tax on each sale separately. On Form 8949 and Schedule D:

1. Short-term gains and losses are netted against each other.
2. Long-term gains and losses are netted against each other.
3. If one result is a gain and the other a loss, they offset.
4. A net capital loss can reduce other income by up to $3,000 ($1,500 married filing separately); Topic 409 says any excess carries forward.

Example. You have $8,000 of short-term gains, $3,000 of short-term losses, $5,000 of long-term gains, and $15,000 of long-term losses. Net short-term: +$5,000. Net long-term: −$10,000. Combined: −$5,000. You deduct $3,000 against other income this year and carry $2,000 of long-term loss forward.

A harvested loss saves the most when it ends up offsetting short-term gains, which would otherwise be taxed at ordinary rates of up to 37%, rather than long-term gains taxed at 15%. A $10,000 loss that cancels short-term gains for a filer in the 24% bracket saves $2,400; the same loss against long-term gains saves $1,500.

Carryovers keep their character. In the example, the $2,000 carried forward is a long-term loss, so next year it first offsets long-term gains. Use the capital loss carryover worksheet in the Schedule D instructions to track it, and keep the worksheet with your records; your broker will not carry it for you.

Strategies that use the rate difference

Wait past the one-year mark

If you are within a few weeks of the long-term date, the price drop it would take to erase the tax savings is often larger than you think. In the $120,000 single example, waiting is worth $1,800 on a $20,000 gain — 9% of the gain.

Harvest losses, and respect the wash-sale rule

Selling losers to offset winners reduces tax dollar for dollar. Publication 550's wash-sale rule disallows a loss on stock or securities if you buy substantially identical stock or securities within 30 days before or after the sale; the disallowed loss is added to the basis of the new shares. Plan swaps with the tax-loss harvesting calculator. Digital assets raise their own questions, covered in our guide to crypto tax-loss harvesting.

Harvest gains at 0%

If your taxable income including the gain stays under the 0% ceiling ($49,450 single, $98,900 joint in 2026), you can sell long-term winners tax-free and immediately buy them back. The wash-sale rule applies to losses, not gains, so the repurchase resets your basis higher without penalty. Watch the side effects: higher AGI can affect credits, health insurance premium subsidies, and the taxation of Social Security benefits.

Use tax-advantaged accounts for frequent trading

Trades inside a 401(k) or IRA do not create capital gains at all. Withdrawals from traditional accounts are ordinary income regardless of how the money was earned, and qualified Roth withdrawals are tax-free, so short-term trading belongs inside those accounts rather than in a taxable brokerage account.

Where the gain is reported

Each sale goes on Form 8949 (unless your broker reported basis and no adjustments are needed, in which case totals can go directly on Schedule D), and the totals flow to Schedule D and then to Form 1040. Your broker's Form 1099-B shows whether each lot is short-term or long-term.

For more ways to lower the bill, see our capital gains tax strategies guide. For bitcoin and other digital assets, use the crypto capital gains tax calculator, and for dividends, which share the long-term brackets, see the dividend tax calculator.