Capital Gains Tax (Short vs Long-Term)

Capital gains tax in the US splits into two regimes based on holding period:

• Short-term capital gains (held ≤ 1 year before sale): taxed as ordinary income at the same bracket as wages. No discount, no preferential treatment.
• Long-term capital gains (held > 1 year): taxed at preferential rates — 0%, 15%, or 20% — depending on total taxable income.

The 2026 long-term brackets (single filer):

• 0% up to $48,350 of taxable income.
• 15% between $48,350 and $533,400.
• 20% above $533,400.

Married filing jointly thresholds are roughly double the single amounts.

Two extra layers sit on top:

• Net Investment Income Tax (NIIT): 3.8% surcharge on investment income (including long-term gains) above $200,000 single / $250,000 MFJ MAGI.
• State capital gains tax: most states tax all gains at the regular state income-tax rate (no long-term preference). California is the most expensive — long-term gains face 13.3% state tax on top of federal.

Tax-loss harvesting is the most-cited optimisation: realise losing positions to offset gains and reduce taxable income by up to $3,000 of net losses against ordinary income each year. Use the capital gains tax calculator to model both regimes.