Learning capital gains tax is crucial to any person selling investments, houses, or other valuable assets. Your tax will depend on a range of factors, including asset sold type, taxable income, and time of how long you held the property prior to selling it. With the IRS coming out with new brackets for both 2025 and 2026, citizens need to understand these changes to efficiently plan their economic strategy.
Fundamentals of capital gains tax
Capital gains tax occurs when you sell an investment for more than its cost. The government distinguishes two forms on the basis of holding times. Short-term capital gains apply to assets that were held for one year or less and are taxed at regular income tax rates, which range from 10% to 37% for 2025. Long-term capital gains apply to possession greater than one year and have preferential 0%, 15%, or 20% tax rates, depending on your tax income.
The holding period calculation begins on the day after you acquire the asset and continues up to the day you sell it. This is important because long-term rates are intended to encourage persistent investment rather than short-term speculation.
2025 capital gains tax brackets
For tax year 2025, which you’ll report on returns in 2026, the IRS adjusted long-term capital gains brackets by approximately 2.8% for all filing statuses to account for inflation as provisioned by the One Big Beautiful Bill. Single filers can now have up to $48,350 of taxable income and qualify for the 0% rate, an increase from $47,025 in 2024. Single filers pay a 15% rate for income in the range of $48,351 to $533,400, and over $533,401 at a highest 20% rate.
For joint filers, married persons, their 0% rate limit increased from $94,050 in 2024 to $96,700 for 2025. The 15% range extends to joint filers whose taxable incomes are between $96,701 and $600,050, with the 20% rate starting above $600,051. Head of household filers see the 0% rate extend to $64,750, with the 15% range extending from $64,751 through $566,700, with the 20% range extending above $566,701.
These inflation adjustments also prevent bracket creep, which would drive taxpayers into higher tax brackets due to inflation rather than actual increases in purchasing power.
What’s new for 2026
The IRS released the 2026 long-term capital gain brackets in October for use on assets sold in 2026 and reported on tax returns submitted in early 2027. Single filers will qualify for the 0% rate on incomes up to $49,450, a rise from the 2025 threshold. The 15% rate is reserved for incomes between $49,451 and $545,500, and incomes of over $545,501 will be charged at 20%.
Married filing jointly couples will see their 0% bracket raised to $98,900, and the 15% zone will be $98,901 to $613,700. Anything over $613,701 will be taxed at 20%. The 0% rate will be up to $66,200 for head of household filers, the 15% rate $66,201 to $579,600, and the 20% rate over $579,601.
These adjustments are in line with annual inflation-indexed rises, allowing taxpayers to potentially earn more while remaining eligible for lower tax brackets.
Special capital gains considerations
Not all capital gains receive the standard preferential treatment. Collectibles such as art, stamps, and coins, and precious metals such as silver and gold are taxed at the top rate of 28%, far larger than the standard 20% top rate. This is a political choice to tax assets that do not build economic innovation or contribute to productivity growth.
Also, high-income earners must be aware of the Net Investment Income Tax, an additional 3.8% surtax on investment income, including capital gains. The NIIT is applied to those with modified adjusted gross income in excess of $200,000 for single filers, $250,000 for joint filing couples, and $125,000 for married filing separately. Most significantly, these NIIT thresholds have never been indexed for inflation since their creation in 2013 when the tax went into law, so that increasingly more taxpayers qualify this surcharge yearly.
The NIIT is figured on the lesser of your net investment income or the difference between your MAGI and the applicable threshold. For instance, if you are a single filer with MAGI of $230,000 and net investment income of $25,000, you would pay the 3.8% tax on $25,000, not on the entire $30,000 over the threshold.
Home sale exclusion rules
Home owners receive special capital gains treatment under the Section 121 exclusion. This provides single filers with an exclusion of up to $250,000 of capital gain on sale of their principal residence, and married couples filing jointly with an exclusion of up to $500,000.
To overcome this exclusion, you will have had to occupy and live in the residence as your main home for at least two of the five years preceding the sale. The two-year requirement does not necessarily need to be consecutive, providing flexibility for people who temporarily rent their homes. Nevertheless, this exclusion is only allowed once every two years.
Any profit above the exclusion amount is subject to long-term capital gain tax at the rate of your income. To illustrate, if an unmarried filer sells a residence and earns a $300,000 profit, $50,000 of the profit will be taxed at 0%, 15%, or 20% based on total taxable income.
