Capital Gains Tax

Capital gains tax applies to the profit when you sell an asset for more than you paid. The single biggest factor is how long you held it. Sell after more than one year and the gain is long-term, taxed at preferential rates of 0, 15, or 20 percent depending on your taxable income. Sell within a year or less and the gain is short-term, taxed at your ordinary income rate, which is usually higher.

The one-year holding period is the line that separates the two, which is why timing a sale can matter as much as the size of the gain. Long-term gains stack on top of your ordinary income to decide which of the 0, 15, or 20 percent bands they fall into, and high earners may owe an extra net investment income tax on top. Our capital gains playbook walks through long-term versus short-term rates for 2026 with worked examples.