💹 How to Calculate Capital Gains Tax in 2026
Complete Guide to Short-Term & Long-Term Capital Gains with Tax Rates & Examples
📋 Table of Contents
🎯 Key Takeaway
Capital Gains Tax = (Selling Price − Cost Basis) × Tax Rate. Assets held over 1 year get favorable long-term rates (0%, 15%, or 20%), while assets held less than 1 year are taxed as ordinary income (10-37%).
1. What is Capital Gains Tax?
Capital gains tax is a tax on the profit you make when selling an asset for more than you paid. This applies to:
- Stocks & bonds — Individual shares, mutual funds, ETFs
- Real estate — Investment property, rental homes, land
- Cryptocurrency — Bitcoin, Ethereum, NFTs
- Collectibles — Art, antiques, precious metals
- Business interests — Partnership stakes, business sales
💡 Good to Know
You only pay capital gains tax when you realize the gain (actually sell the asset). Unrealized gains (paper profits) are not taxed until you sell.
2. Short-Term vs Long-Term Capital Gains
The holding period — how long you owned the asset — determines which tax rate applies:
| Attribute | Short-Term Capital Gains | Long-Term Capital Gains |
|---|---|---|
| Holding Period | 1 year or less | More than 1 year |
| Tax Rate | Ordinary income rates (10-37%) | Preferential rates (0%, 15%, or 20%) |
| Best For | Active trading, quick flips | Buy-and-hold investing |
| Planning Opportunity | Limited | Higher tax savings potential |
⚠️ Important: The 1-Year Rule
To qualify for long-term rates, you must hold the asset for at least one year and one day. If you bought on January 15, 2025, you must wait until January 16, 2026 to sell for long-term treatment.
3. 2026 Capital Gains Tax Rates
3.1 Long-Term Capital Gains Rates (2026)
These preferential rates apply to assets held more than one year:
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 0% | $0 – $48,350 | $0 – $96,700 | $0 – $64,750 |
| 15% | $48,351 – $533,400 | $96,701 – $600,050 | $64,751 – $566,700 |
| 20% | Over $533,400 | Over $600,050 | Over $566,700 |
3.2 Short-Term Capital Gains Rates (2026)
Short-term gains are taxed as ordinary income based on your tax bracket:
| Tax Bracket | Single Filers | Married Filing Jointly |
|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 |
| 12% | $11,926 – $48,475 | $23,851 – $96,950 |
| 22% | $48,476 – $103,350 | $96,951 – $206,700 |
| 24% | $103,351 – $197,300 | $206,701 – $394,600 |
| 32% | $197,301 – $250,525 | $394,601 – $501,050 |
| 35% | $250,526 – $626,350 | $501,051 – $751,600 |
| 37% | Over $626,350 | Over $751,600 |
3.3 Net Investment Income Tax (NIIT)
High earners may owe an additional 3.8% NIIT on investment income if modified AGI exceeds:
- $250,000 — Married Filing Jointly
- $200,000 — Single or Head of Household
4. Capital Gains Tax Formulas
4.1 Calculate Capital Gain
📐 Formula: Capital Gain
Cost Basis = Purchase Price + Acquisition Costs + Improvements
4.2 Calculate Adjusted Cost Basis
📐 Formula: Adjusted Cost Basis
Include broker fees, legal fees, and any improvements that add value
4.3 Calculate Tax Owed
📐 Formula: Capital Gains Tax
Use short-term or long-term rate based on holding period
4.4 Calculate Net Proceeds
📐 Formula: After-Tax Proceeds
This is what you actually keep after the sale
5. Capital Gains Tax Calculator
Use our calculator to estimate your capital gains tax liability:
6. Worked Examples
Example 1: Long-Term Stock Sale
📝 Problem
You bought 100 shares of Apple at $150/share in 2024 and sold them at $200/share in 2026. Your taxable income is $60,000. Filing single.
Cost Basis = 100 × $150 = $15,000
Proceeds = 100 × $200 = $20,000
Gain = $20,000 − $15,000 = $5,000
Held > 1 year = Long-term. Income $60,000 (single) = 15% rate
Tax = $5,000 × 15% = $750
Answer: You owe $750 in capital gains tax. Net profit after tax: $4,250.
Example 2: Short-Term Crypto Sale
📝 Problem
You bought 2 Bitcoin at $30,000 each in March 2026 and sold them at $45,000 each in October 2026. Taxable income is $90,000. Filing single.
Cost Basis = 2 × $30,000 = $60,000
Proceeds = 2 × $45,000 = $90,000
Gain = $90,000 − $60,000 = $30,000
Held < 1 year=Short-term. Income $90,000 (single)=22% bracket
Tax = $30,000 × 22% = $6,600
Answer: You owe $6,600 in capital gains tax. Net profit after tax: $23,400.
Example 3: Real Estate with Improvements
📝 Problem
You bought a rental property for $300,000, spent $50,000 on improvements, and sold it for $450,000 after 5 years. Closing costs were $15,000. Taxable income is $150,000. Married filing jointly.
Basis = $300,000 + $50,000 = $350,000
Net Proceeds = $450,000 − $15,000 = $435,000
Gain = $435,000 − $350,000 = $85,000
Held > 1 year = Long-term. Income $150,000 (MFJ) = 15% rate
Tax = $85,000 × 15% = $12,750
Answer: You owe $12,750 in capital gains tax. Net profit after tax: $72,250.
7. Capital Gains on Real Estate
Primary Residence Exclusion
If you sell your primary home, you may qualify for a significant tax exclusion:
🏠 Section 121 Exclusion
- Single filers: Exclude up to $250,000 in gains
- Married filing jointly: Exclude up to $500,000 in gains
- Requirements: Owned and lived in home for 2 of last 5 years
- Frequency: Can use every 2 years
1031 Exchange (Like-Kind Exchange)
Investment property owners can defer capital gains taxes by reinvesting proceeds into similar property:
- Must identify replacement property within 45 days
- Must close within 180 days
- Must use a qualified intermediary
- Only applies to investment/business property (not personal residence)
8. How to Reduce Capital Gains Tax
💰 Tax-Saving Strategies
- Hold investments over 1 year — Qualify for lower long-term rates
- Tax-loss harvesting — Offset gains with losses from other investments
- Use retirement accounts — No capital gains tax in 401(k) or IRA
- Gift appreciated assets — Transfer basis to recipient (gift tax limits apply)
- Donate to charity — Deduct full market value without paying gains tax
- Opportunity Zones — Invest gains in qualified zones for deferral/reduction
- Time your sales — Sell in years with lower income to hit 0% bracket
⚠️ Wash Sale Rule
You cannot claim a tax loss if you repurchase the same or substantially identical security within 30 days before or after the sale. The IRS disallows the loss deduction in wash sale situations.