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What Is Capital Gains Tax?
When you sell an asset for more than you paid for it, the profit is called a capital gain. The IRS taxes that profit. How much you pay depends on how long you held the asset and how much money you make overall.
Rates and figures as of May 2026.
Short-Term vs Long-Term Capital Gains
This is the most important distinction in capital gains tax.
Short-term gains come from assets you held for one year or less. They are taxed at your regular income tax rate, which can be as high as 37%.
Long-term gains come from assets you held for more than one year. They are taxed at lower rates: 0%, 15%, or 20%.
Holding an investment for just one extra day can move it from short-term to long-term and save you a significant amount of tax.
2026 Long-Term Capital Gains Tax Rates
Your long-term rate depends on your taxable income:
- 0% rate: Single filers earning up to $47,025; married filing jointly up to $94,050
- 15% rate: Single filers earning $47,026 to $518,900; married filing jointly up to $583,750
- 20% rate: Income above those thresholds
Many middle-income households pay 0% on long-term gains. This is one of the biggest tax breaks available to regular investors.
Special Rules for Crypto and Real Estate
Cryptocurrency: The IRS treats crypto like property. Every time you sell, trade, or spend crypto, it is a taxable event. Short-term gains are taxed as income. Long-term gains get the 0/15/20% treatment.
Real estate: If you sell your primary home, you can exclude up to $250,000 in gains ($500,000 if married) from taxes. You must have owned and lived in the home for at least two of the last five years. Investment properties do not get this exclusion.
How to Minimize Capital Gains Tax
Hold for More Than a Year
The simplest strategy. Waiting just over 12 months before selling converts short-term gains into long-term gains.
Tax-Loss Harvesting
If you have investments that are worth less than you paid for them, selling them generates a capital loss. You can use those losses to offset capital gains dollar for dollar. If losses exceed gains, you can deduct up to $3,000 against regular income. Extra losses carry forward to future years.
Use Tax-Advantaged Accounts
Inside a Roth IRA or traditional IRA, you do not pay capital gains taxes on growth. Investments inside a 401(k) also grow tax-deferred. Moving your highest-growth assets into these accounts can save a lot over time.
Donate Appreciated Assets
If you donate stock or other appreciated assets to charity instead of selling them, you avoid capital gains tax entirely and still get a charitable deduction for the full market value.
Capital gains planning works best alongside a broader investment strategy. Read our guide to opening a Roth IRA to see how tax-free growth can work in your favor. You can also compare index funds vs ETFs to decide where to put your money. For hands-on portfolio management, check out the best investment apps for beginners.
Frequently Asked Questions
What is the capital gains tax rate for most people in 2026?
Most middle-income households pay 15% on long-term capital gains. If your income is below $47,025 (single) or $94,050 (married), you may pay 0%.
Do I owe capital gains tax if I sell my house?
Probably not on all of it. If you owned and lived in the home for at least two of the last five years, you can exclude up to $250,000 in gains ($500,000 if married) from taxes.
How is crypto taxed for capital gains?
The IRS treats cryptocurrency as property. Every sale or trade is taxable. Gains on crypto held over a year get long-term rates (0%, 15%, 20%). Short-term gains are taxed as ordinary income.
What is tax-loss harvesting?
Selling investments worth less than you paid generates a capital loss. That loss offsets your gains, reducing your tax bill. Losses over $3,000 carry forward to future years.
Are capital gains taxed separately from regular income?
Long-term gains have their own tax rates (0/15/20%). Short-term gains are added to regular income and taxed at your ordinary rate, up to 37%.