Capital Gains Tax Strategies for 2026: Brackets, Timing, and the Rules That Changed

Capital gains tax planning comes down to a few questions: when to sell, how much to sell in a given year, which lots to sell, and whether to sell at all. The answers depend on the brackets, a handful of surtaxes and thresholds, and some rules that changed with the 2025 tax law. This guide gives the 2026 numbers, works through examples, and flags the 2026 quirk in the Opportunity Zone program.

2026 federal rates

Short-term gains (assets held one year or less) are taxed as ordinary income, up to 37%. Long-term gains use their own brackets, set for 2026 by IRS Rev. Proc. 2025-32:

The thresholds apply to total taxable income, with long-term gains stacked on top of ordinary income. Other rates to know:

• Net investment income tax (NIIT): 3.8% on the lesser of net investment income or modified AGI above $200,000 (single) or $250,000 (joint). These thresholds are not indexed for inflation.
• Collectibles (art, coins, physically backed metal ETFs): up to 28%.
• Unrecaptured Section 1250 gain (depreciation on real estate): up to 25%.
• Qualified small business stock: partly or fully excluded under Section 1202, covered below.

State taxes add to this. California taxes capital gains as ordinary income. Washington, which has no general income tax, taxes long-term gains above a standard deduction ($278,000 for 2025) at 7%, plus 2.9% on taxable gains above $1 million from 2025, per the Department of Revenue.

Timing sales around the brackets

An illustration: a married couple has $80,000 of taxable ordinary income each year and wants to realize $60,000 of long-term gains.

• All in 2026: the first $18,900 of gain fills the 0% bracket up to $98,900, and the other $41,100 is taxed at 15%. Federal tax: $6,165.
• Split over two years, $30,000 each: $18,900 at 0% and $11,100 at 15% each year. Federal tax: $3,330 in total.

Splitting saves $2,835, assuming similar income in both years. The same logic makes low-income years valuable: a sabbatical, the gap between retirement and Social Security, or a year with a business loss. Some people in the 0% bracket also sell and immediately rebuy winners to reset their basis higher at no tax cost ("gain harvesting"). The wash-sale rule does not apply to gains.

Watch the side effects

Capital gains raise AGI, which feeds into other calculations:

• NIIT. An illustration: a single filer with $150,000 of MAGI who realizes a $100,000 gain has MAGI of $250,000. NIIT applies to the lesser of the $100,000 gain or the $50,000 excess over $200,000, so $1,900.
• Medicare premiums. IRMAA surcharges on Part B and D premiums use your MAGI from two years earlier, so a 2026 sale can raise 2028 premiums.
• Social Security taxation, ACA premium credits, and income-based deductions such as the senior deduction added in 2025, which phases out at higher incomes.

Which lots to sell

If you bought the same fund or stock at different times, you can choose which shares to sell. Selling the highest-cost lots first minimizes the gain. Many brokers default to first-in, first-out for stocks (and average cost for mutual funds), which usually sells your oldest, lowest-cost shares first. Set your default to specific identification or highest cost before you sell; changing it afterward is generally too late. For crypto, US rules have required tracking basis separately for each wallet or exchange account since 2025.

Harvesting losses

Selling investments at a loss offsets gains dollar for dollar, and up to $3,000 a year of excess losses offsets ordinary income, with the rest carried forward. The wash-sale rule disallows the loss if you buy the same or a substantially identical security within 30 days before or after the sale, including in an IRA or your spouse's account. A loss disallowed because of an IRA purchase is lost permanently. Swapping into a similar but not identical fund, such as a different index provider's fund tracking a different index, keeps market exposure. Our tax-loss harvesting guide covers the mechanics, and direct indexing automates it at the individual stock level.

Harvesting lowers your basis, so it mostly defers tax rather than eliminating it, unless you later hold until death or donate the shares.

Giving appreciated assets

Donating appreciated stock held more than a year to a public charity or donor-advised fund avoids the gain and, if you itemize, gives a deduction for the full market value (generally up to 30% of AGI for appreciated property).

An illustration: stock worth $10,000 with a $2,000 basis. Selling it at 15% plus NIIT would cost $1,504 in tax on the $8,000 gain. Donating it avoids that tax entirely, and the charity receives the full $10,000.

The 2025 tax law changed charitable deductions from 2026:

• Itemizers can deduct only gifts above 0.5% of AGI each year.
• For taxpayers in the 37% bracket, itemized deductions are worth at most 35 cents per dollar.
• Non-itemizers can deduct up to $1,000 ($2,000 joint) of cash gifts to operating charities, but not gifts to donor-advised funds.

Because the 0.5% floor applies each year, bunching several years of giving into one year, often through a donor-advised fund, gets more value from the deduction. People over 70½ can give directly from an IRA through qualified charitable distributions, which avoid the floor and the cap entirely. See our philanthropy guide.

Real estate

• Home sale exclusion. $250,000 single or $500,000 joint if you owned and lived in the home two of the last five years. These amounts have not changed since 1997.
• 1031 exchanges. Since 2018, only real property qualifies. You must identify replacement property within 45 days and close within 180 days, using a qualified intermediary. The deferred gain carries into the new property.
• Depreciation recapture. Gain attributable to depreciation on rental property is taxed at up to 25% even when the rest is long term.

For investment property, see our commercial real estate guide.

Opportunity Zones: why 2026 is an odd year

The original Opportunity Zone program let investors defer gains by investing in a Qualified Opportunity Fund, but all deferred gains become taxable on December 31, 2026, whatever the investment date. The 2025 tax law made the program permanent with new rules for investments from January 1, 2027: a rolling five-year deferral, a 10% basis increase after five years (30% for qualified rural funds), a new map of eligible tracts, and the existing exclusion of fund appreciation after ten years.

Two consequences:

• Anyone who deferred gains under the original program will owe that tax on their 2026 return, due in April 2027. Plan the cash now.
• A gain invested under the original rules in 2026 is deferred only until year end, so there is little deferral benefit. A gain realized later in 2026 has 180 days to be invested, which may reach into 2027 and the new rules. The effective-date details matter, so confirm them with a tax professional before relying on them.

See our Opportunity Zone guide.

Business owners and founders

• Qualified small business stock. For C corporation stock issued after July 4, 2025, Section 1202 excludes 50% of the gain after three years, 75% after four, and 100% after five, up to $15 million per issuer (or ten times basis), for companies with gross assets up to $75 million. Stock issued earlier keeps the old rules: five-year holding, $10 million cap, $50 million asset test.
• Installment sales. Spreading payments over years spreads the gain, which can keep more of it in lower brackets. For deals where installment obligations exceed $5 million, an interest charge on the deferred tax reduces the benefit.

Our business succession guide covers sale structures.

Holding until death

Assets held at death receive a basis equal to their market value, so the heirs' unrealized gain disappears. In community property states, both halves of community property generally get the new basis at the first spouse's death. With the estate tax exemption at $15 million per person in 2026, most estates owe no estate tax, which makes holding highly appreciated assets until death attractive for older investors. The trade-off is concentration: a large, undiversified position carries risk that may outweigh the tax saved. See our estate planning guide.

Year-end checklist

1. Estimate taxable income for 2026 and see how much room remains in the 0% and 15% brackets.
2. Check whether gains would push MAGI past NIIT, IRMAA, or other thresholds.
3. Review unrealized losses for harvesting, and check purchases within 30 days on both sides, including IRAs and dividend reinvestment.
4. Set lot selection to specific identification or highest cost.
5. Plan charitable gifts of appreciated stock, bunching if the 0.5% floor makes annual gifts inefficient.
6. If you have deferred Opportunity Zone gains, set aside cash for the 2026 tax.

For the broader picture, see our guides to tax-efficient investing and investment tax planning.

This guide is for informational purposes only and does not constitute tax, investment, or legal advice. Tax rules change and depend on individual circumstances; consult a qualified CPA or tax attorney before acting.