Capital Gains Tax in 2026: The 0%, 15%, and 20% Brackets and How to Use Them

Capital gains are the most plannable kind of income there is. Wages show up when they show up. A gain is realized when you decide to sell, and not before. That control is worth a great deal once you know where the brackets sit, and the 2026 brackets include a surprisingly generous 0% rate that a lot of retirees never touch.

The three rates

Hold an asset more than a year and sell it at a profit, and you've got a long-term capital gain, taxed at preferential rates based on taxable income (that's after the standard or itemized deduction).

Qualified dividends use the same brackets. Gains on assets held a year or less are short-term and taxed as ordinary income at rates up to 37%. Collectibles get taxed at up to 28%, and the depreciation-recapture slice of a real estate gain at up to 25%.

The surtax on top

Above $200,000 of modified AGI for single filers and $250,000 for joint filers, the 3.8% net investment income tax kicks in on the lesser of net investment income or the amount over the threshold. Those thresholds were set in 2013 and have never been indexed, so they catch more households every year. In practice, the top rate on gains is 23.8%, and the 15% rate is really 18.8% for anyone above the surtax line.

Gains stack on top of ordinary income

Stacking is the detail that drives most of the planning. Capital gains don't get taxed in their own separate system. They sit on top of your ordinary income, and the rate depends on where the combined total lands.

Say a retired couple has $60,000 of ordinary income (pension, interest, IRA withdrawals). After the $32,200 standard deduction, they've got $38,900 of room before the 0% gains bracket ends at $98,900. They can realize $38,900 of long-term gains and pay nothing on them. Realize $60,000 instead, and the last $21,100 gets taxed at 15%.

It works in reverse too. A Roth conversion or an extra IRA withdrawal raises ordinary income and shoves gains that would have been free into the 15% bracket. So the year's gains, conversions, and withdrawals have to be planned together, not one at a time. Our Roth conversion guide covers the same interaction from the other side.

Harvesting gains at 0%

For retirees in those low-income years between leaving work and required distributions, the 0% bracket is a chance to reset the basis on appreciated holdings for free. Sell enough of a long-held fund to fill the bracket, buy it right back (there's no wash sale rule on gains), and your basis is now higher. When you sell later in a higher-income year, the taxable gain is smaller.

It's the mirror image of loss harvesting, and in the right year it's worth more. But it also touches Social Security taxation and Medicare premiums, so the amount has to be checked against the whole projection rather than the gains bracket alone.

Harvesting losses in the other years

In high-income years, realized losses offset realized gains dollar for dollar, then up to $3,000 of ordinary income, and whatever's left carries forward indefinitely. Losses harvested in a down market become a bank that makes future gains cheaper. The full mechanics, and the situations where harvesting actually hurts, are in tax-loss harvesting explained.

Timing large gains

A business sale, a real estate sale, or unwinding a concentrated position can produce a gain that spans several brackets in a single year. The tools for spreading it out: staged sales across tax years, installment sales where the buyer pays over time, charitable gifts of the appreciated asset before the sale, opportunity zone investments in narrow cases, and, for a primary residence, the $250,000 single / $500,000 joint exclusion. Timing a sale to land after you've established Florida residency removes the state tax layer entirely; our guide to Florida's lack of an income tax has the domicile details.

Assets that avoid the tax altogether

Two paths eliminate capital gains tax rather than just trimming it. Assets held until death get a step-up in basis, so the gain disappears for your heirs. Appreciated assets given to charity produce a deduction for full market value with no gain recognized. Both argue for hanging onto the most appreciated, lowest-basis positions and spending or selling from higher-basis holdings first. Which lots to sell, in which year, is a decision we make position by position as part of tax planning.

Mutual fund distributions

One trap worth knowing about. Mutual funds have to distribute realized gains to shareholders each year, usually in December, and those distributions are taxable even if you reinvest them and even if the fund is down for the year. Actively managed funds in taxable accounts can hand you a gains bill you never chose. Broad index funds and ETFs distribute little or nothing. Check a fund's distribution history before you buy it in a taxable account, and don't buy right before a big December distribution. Basic hygiene.

Frequently asked questions

Joseph G. Valerio, CFP®, EAFounder and Lead Advisor at Valerio Wealth Management, a fee-only, fiduciary virtual family office in Miami, Florida. One advisor, credentialed in both financial planning and federal tax. About Joseph

This article is general education, not individualized advice, and it is not tax, legal, or accounting advice. Figures reflect federal law for the year stated and can change. Valerio Wealth Management does not prepare or file tax returns. Speak with a qualified professional about your own situation before acting.