April 16, 2026 · 5 min read · BasilTax
Capital Gains Tax 2026: Short vs. Long Term
Rates, holding periods, and state overlays.
Capital gains tax depends on how long you held the asset, your income level, and sometimes state law. Short-term gains (held one year or less, generally) are taxed as ordinary income. Long-term gains (held more than one year) usually qualify for preferential rates.
TL;DR
- Holding period starts the day after acquisition and includes the sale date per IRS rules.
- Short-term gains stack on top of wages and use ordinary brackets.
- Long-term gains use 0/15/20% federal rates for many taxpayers, subject to income limits.
- States may tax gains as ordinary income or with different rules.
Short-term vs. long-term (simple)
| Type | Typical holding | Federal treatment |
|---|---|---|
| Short-term | One year or less | Ordinary income rates |
| Long-term | More than one year | LTCG rates (with exceptions) |
Document proof callout: Your 1099-B shows proceeds and basis; Box 1b acquisition date drives holding period for covered securities.
State overlays
Some states conform to federal holding periods but tax at flat or graduated rates. California does not offer a federal-style 0% LTCG rate the same way the federal system does for lower-income taxpayers. Always check your state’s instructions.
Wash sales and crypto
- Wash sales (stocks/options) can defer losses to a later lot; your 1099-B may adjust totals.
- Crypto is not subject to the same wash-sale statute as stocks (as of common understanding at time of writing), but reporting and substance rules still apply—track cost basis carefully.
Worked example
Buy stock Jan 10, Year 1. Sell Jan 10, Year 2—often short-term (not more than one year). Sell Jan 11, Year 2—often long-term. Confirm exact date rules on your confirmations.
FAQ
Do I pay Medicare tax on gains?
NIIT may apply to investment income at higher MAGI levels (Form 8960), separate from capital gains rates.
How to act on this today
Use our capital gains tool for an illustrative split, then register for Schedule D-grade accuracy on your full PDFs. Filed already? Verify 8949 lines.
Educational content only—not individualized tax advice.
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