When you sell an asset for more than you paid, the profit is a capital gain, taxed differently based on how long you held it.
Short-term vs long-term
Assets held one year or less are taxed at ordinary income rates. Assets held longer get preferential rates of 0%, 15% or 20% based on taxable income. In 2026 a single filer pays 0% on long-term gains up to about $49,450 of taxable income and 15% up to about $545,500.
Extra taxes
High earners may owe a 3.8% net investment income tax on gains when modified AGI exceeds $200,000 for single filers or $250,000 for joint filers. State taxes may also apply.
Ways to reduce them
Hold investments longer than a year, use tax-advantaged accounts, harvest losses to offset gains, donate appreciated stock instead of cash and sell in low-income years. Primary home sales may exclude up to $250,000 of gain, or $500,000 for married couples, when requirements are met.
Try the numbers
Use our Capital Gains Tax Calculator to see this in practice. With its default example (Capital gain: $40,000; Other taxable income: $90,000; Filing status: Single), it shows long-term capital gains tax: $6,000. Adjust the inputs to match your situation.
Key takeaways
- Hold assets over a year for lower rates.
- Tax-advantaged accounts shelter gains entirely.
- Losses can offset gains and some ordinary income.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.