Capital Gains: Same Rates, New Planning Angles

On the surface, capital gains rules in 2026 look familiar. Long‑term capital gains (on assets held more than one year) are still taxed at 0%, 15%, or 20%, depending on your taxable income and filing status. Short‑term gains continue to be taxed at ordinary income rates, which can be significantly higher for many investors. The 3.8% Net Investment Income Tax (NIIT) still applies above certain income thresholds, adding another layer of tax for higher‑income households. Yet beneath that continuity, inflation‑adjusted thresholds and evolving portfolios create fresh planning angles for 2026.​

The most important nuance is that the income thresholds for each long‑term capital gains bracket have shifted upward. For example, the top of the 0% bracket and the starting points for the 15% and 20% brackets have all been adjusted so that more dollars can potentially be realized at lower rates compared with earlier years. For single filers, the 15% bracket now covers a broad range of taxable income between roughly the upper 40,000s and mid‑500,000s, with the 20% rate kicking in above that. Married couples filing jointly see somewhat higher thresholds, reflecting combined income. Those ranges reinforce that long‑term capital gains are often taxed at more favorable rates than ordinary income, but they also underscore the value of careful timing.​

One powerful strategy in this environment is “filling” lower capital gains brackets intentionally. If, for instance, your projected taxable income places you comfortably within the 15% long‑term gains bracket, you may have room to realize additional gains without pushing yourself into the 20% band. In years when your income is temporarily lower—perhaps due to a sabbatical, career transition, or higher retirement contributions—this can be especially attractive. Realizing gains in those years at 0% or 15% may lower your lifetime tax bill compared with waiting until future years when your income, tax law, or both could be less favorable.​

Tax‑loss harvesting remains a cornerstone of capital gains planning in a volatile market. The basic concept is straightforward: you sell investments that are trading below your purchase price to realize a capital loss, which can offset current or future capital gains. Net capital losses can offset up to 3,000 dollars of ordinary income per year, with excess carried forward to future years. The real planning art lies in doing this while maintaining your investment strategy. That often means pairing loss realizations with purchases of similar, but not “substantially identical,” securities to avoid the wash‑sale rule, which disallows the loss if you buy the same or substantially identical investment within 30 days before or after the sale.​

High‑income investors must also contend with the 3.8% Net Investment Income Tax, which applies when modified adjusted gross income exceeds 200,000 dollars for single filers and 250,000 dollars for married couples filing jointly. The NIIT is applied to the lesser of net investment income (including interest, dividends, capital gains, rental income, and certain passive business income) or the amount by which income exceeds those thresholds. This effectively creates a higher marginal tax rate on investment income for those above the thresholds, particularly when combined with the 20% long‑term capital gains rate. Coordinating the timing of gains and losses with other income events—such as Roth conversions, stock option exercises, or business income—can help manage NIIT exposure.​

For example, suppose you anticipate a large one‑time event this year, like the sale of a business or a significant restricted stock unit (RSU) vest. You and your advisor might:

• Accelerate some gain realization into years when income is lower and NIIT does not apply.​
• Pair the big income year with aggressive loss harvesting to soften the NIIT impact.​
• Structure part of a business sale as an installment sale, spreading income across years to avoid jumping far above the thresholds.​

Capital gains planning also intersects with charitable giving and estate strategies. Donating appreciated securities directly to charity, or to a donor‑advised fund, can allow you to avoid realizing capital gains while still taking a charitable deduction if you itemize. For investors with concentrated positions—often in company stock—this can be a way to reduce single‑stock risk and tax exposure at the same time. At the estate level, the possibility of step‑up in basis at death remains a key factor in deciding whether to hold or sell appreciated positions during life. That said, potential future tax law changes keep this area fluid, reinforcing the value of periodic reviews.​

In this “same rates, new angles” setting, the main takeaway is that capital gains management is less about chasing short‑term moves and more about matching tax decisions to your broader life timeline. The bracket structure, NIIT thresholds, and your personal income path create a unique map for when gains and losses will be most tax‑efficient. An advisor can help model different paths, showing how proactive harvesting, bracket‑filling, charitable gifts, and NIIT planning can reduce lifetime taxes while keeping your portfolio aligned with your risk and return objectives.​

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