Does the 3.8% Net Investment Income Tax (NIIT) apply on top?

Yes. NIIT (Net Investment Income Tax) adds an extra 3.8% on top of either short-term OR long-term capital gains rates if your modified adjusted gross income exceeds $200,000 single / $250,000 married filing jointly. So a top-bracket filer can pay 23.8% on long-term gains (20% + 3.8%) or up to 40.8% on short-term (37% + 3.8%). NIIT thresholds are NOT inflation-adjusted, meaning more taxpayers fall into it each year.

How much tax would I pay on $100,000 short-term vs long-term?

For a single filer with $200,000 taxable income (24% federal bracket): a $100,000 short-term gain pushes you into the 32% bracket on the gains portion → roughly $32,000 in federal tax. The same $100,000 as long-term gain stays in the 15% LTCG bracket → $15,000 in federal tax. That is a $17,000 difference. Add state tax (e.g., California 9.3% on both = $9,300 extra) and NIIT 3.8% if your MAGI exceeds the threshold ($3,800 extra).

What is tax-loss harvesting and how does it interact with short vs long?

Tax-loss harvesting means selling a losing investment to realize the loss and offset gains. The IRS requires netting in this order: short-term losses first offset short-term gains, long-term losses first offset long-term gains, then any net loss in one category offsets the other category. Up to $3,000 of net losses can offset ordinary income each year ($1,500 if married filing separately), with the remainder carried forward indefinitely. Watch the wash-sale rule: buying the same or substantially identical security within 30 days disallows the loss.

Are crypto and NFTs treated the same as stocks for capital gains?

Mostly yes. Crypto held more than one year qualifies for long-term capital gains treatment (0%/15%/20%). Crypto held one year or less is short-term, taxed at ordinary rates. NFTs and other "collectibles" can be taxed at a maximum 28% long-term rate (higher than the 20% top stock rate). Mining and staking rewards are taxed as ordinary income at receipt, then the holding period for capital gains starts from that receipt date. Form 1099-DA is new for 2026 to report crypto transactions to the IRS.

What records do I need for capital gains tax filing?

You need: purchase date and price (cost basis), sale date and price, any reinvested dividends (which add to basis), and brokerage Form 1099-B showing realized transactions. Report on IRS Form 8949 (Sales of Capital Assets), then summarize on Schedule D (Capital Gains and Losses). Brokerages report basis for "covered" securities (most stocks bought after 2011) but you must self-report basis for older positions, gifts, inheritances, and ESPPs. Keep records for at least 6 years per IRS audit window for substantial omissions.

Short-Term vs Long-Term Capital Gains Tax 2026

Q: Are 2026 long-term capital gains rates 0%, 15%, or 20%?

Yes. For tax year 2026: the 0% rate applies if your total taxable income is at or below $48,350 (single) or $96,700 (married filing jointly). The 15% rate applies between those thresholds and $533,400 (single) / $600,050 (married). The 20% rate applies above $533,400 single or $600,050 married. These thresholds are inflation-adjusted annually by the IRS (Rev. Proc. 2025-32).

Q: Do states tax short-term and long-term capital gains the same?

Most states tax both short-term AND long-term capital gains as ordinary income — they do NOT honor the federal preferential rate. Exceptions: Hawaii caps long-term at 7.25%, New Mexico allows 40% deduction, North Dakota allows 40% deduction, South Carolina allows 44% deduction, and Wisconsin allows 30% deduction. Nine states have no income tax (and therefore no capital gains tax): Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Washington added a 7% capital gains tax in 2022 above $250K.

On a $100,000 stock sale gain in the 24% bracket: short-term tax = $24,000 vs long-term tax = $15,000. The difference is one calendar day. Holding period (≤1 year vs >1 year) determines whether you pay ordinary rates (10–37%) or preferential rates (0/15/20%) — plus 3.8% NIIT and state stacking.

Updated for tax year 2026. Federal data per IRS Rev. Proc. 2025-32. Last reviewed April 27, 2026.

Key Numbers (2026)

• Short-term (≤1 year): taxed at ordinary income rates 10%, 12%, 22%, 24%, 32%, 35%, 37%
• Long-term (>1 year): 0% / 15% / 20% based on taxable income tier
• 0% threshold: $48,350 single, $96,700 married filing jointly
• 20% threshold: $533,400 single, $600,050 married filing jointly
• NIIT 3.8%: if MAGI > $200K single / $250K MFJ (NOT inflation-adjusted)
• Top combined federal: 23.8% LTCG (20%+3.8%) vs 40.8% STCG (37%+3.8%)

The One-Day Tax Cliff

The IRS distinguishes capital gains by how long you held the asset before selling. One year is the cliff. Hold for one year and one day → long-term rate. Sell on the 365th day → short-term rate.

Specifically: the holding period starts the day after you acquire the asset. So if you bought stock on March 15, 2025 and sold on March 15, 2026, that is exactly 365 days — still short-term. Sell on March 16, 2026 → 366 days → long-term. The IRS uses inclusive day-of-sale counting, but excludes the acquisition day.

For inherited assets, the holding period is automatically long-term regardless of when the heir sells (and the cost basis is stepped up to the fair market value on the date of death). Gifted assets keep the donor's holding period and basis.

2026 Federal Long-Term Capital Gains Brackets

Filing Status	0% Rate (Income Up To)	15% Rate (Range)	20% Rate (Income Over)
Single	$48,350	$48,351 – $533,400	$533,400
Married Filing Jointly	$96,700	$96,701 – $600,050	$600,050
Married Filing Separately	$48,350	$48,351 – $300,025	$300,025
Head of Household	$64,750	$64,751 – $566,700	$566,700

Source: IRS Rev. Proc. 2025-32 (inflation-adjusted from 2025 base). Compared to 2025: thresholds rose ~1.3% across the board.

Worked Example: $100K Gain on a $200K-Income Single Filer

You bought 1,000 shares of XYZ at $150 (cost basis $150,000) and sold at $250 (proceeds $250,000) — a $100,000 gain.

Short-term scenario (held 11 months)

$100K gain stacks on $200K ordinary income → $300K total
$100K gain falls into 32% bracket ($197,300–$250,525)
Plus part of it pushes into 35% bracket ($250,525+)
Federal tax on gain: ~$32,800
NIIT 3.8% (MAGI > $200K): +$3,800
California state tax 9.3%: +$9,300
Total tax: $45,900 (45.9% effective)

Long-term scenario (held 13 months)

$100K gain taxed separately from ordinary income
Falls in 15% LTCG bracket (between $48,350 and $533,400)
Federal tax on gain: $15,000
NIIT 3.8% (MAGI > $200K): +$3,800
California state tax 9.3%: +$9,300
Total tax: $28,100 (28.1% effective)

The two-month wait saved $17,800. That is why holding period planning matters more than most stock-picking decisions for taxable accounts.

State-Level Stacking

Most states tax capital gains as ordinary income — they do not honor the federal 0/15/20% preferential rate. So a California resident pays 9.3% (their top state bracket) on long-term gains. That stacks on top of 15% federal + 3.8% NIIT = 28.1% combined on the $100K LTCG example above.

State exceptions (lower long-term capital gains tax)

State	LTCG Treatment	Effective LTCG Rate
Hawaii	Capped at 7.25% statutory	7.25%
New Mexico	40% deduction on LTCG	~3.3% (60% × 5.9% top)
North Dakota	40% deduction on LTCG	~1.7% (60% × 2.9% top)
South Carolina	44% deduction on LTCG	~3.6% (56% × 6.4% top)
Wisconsin	30% deduction on LTCG	~5.4% (70% × 7.65% top)

No state income tax (no state capital gains tax)

Nine states have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming. With one critical exception: Washington enacted a 7% capital gains tax in 2022 on long-term gains exceeding $250K (per individual, indexed annually).

Net Investment Income Tax (NIIT) 3.8%

If your modified adjusted gross income exceeds $200,000 single / $250,000 married filing jointly, an additional 3.8% tax applies to net investment income — including BOTH short-term and long-term capital gains. Critical detail: these thresholds are NOT inflation-adjusted, meaning more taxpayers cross them every year. By 2026, a single filer with $250K AGI pays:

20% federal LTCG (top bracket)
+ 3.8% NIIT
= 23.8% combined federal LTCG rate

For short-term gains in the same scenario: 37% + 3.8% = 40.8% combined federal STCG rate.

Tax-Loss Harvesting Mechanics

The IRS requires losses to net within their category first, then crossover:

Short-term losses offset short-term gains first.
Long-term losses offset long-term gains first.
If one category has a net loss after step 1 or 2, it spills over to offset gains in the other category.
Net losses (after all offsetting) up to $3,000/year ($1,500 if MFS) can deduct against ordinary income.
Any remaining net loss carries forward indefinitely to future years.

Wash-sale rule: if you buy the same or "substantially identical" security within 30 days before or after the loss sale, the loss is disallowed and added to the new position's basis. Applies across taxable + IRA accounts (per Rev. Rul. 2008-5). ETFs tracking different indices avoid wash-sale; the same ticker does not.

Crypto, NFTs, and Collectibles

Crypto held more than one year qualifies for long-term treatment (0/15/20%). Crypto held one year or less = short-term ordinary rates. Important 2026 change: brokers must issue Form 1099-DA for crypto transactions (per IRS final regs Aug 2024).

Collectibles trap: NFTs, art, antiques, gold/silver bullion, gem coins — these face a maximum long-term rate of 28% (instead of 20%). NIIT 3.8% can stack on top → effective 31.8% top federal.

Mining and staking rewards are ordinary income at the time of receipt at fair market value; the holding-period clock for capital gains starts at that receipt date.

Filing Forms

Form 8949 (Sales of Capital Assets): list every transaction. Part I for short-term, Part II for long-term.
Schedule D (Capital Gains and Losses): summarize Form 8949 totals, calculate net gain/loss.
Form 1040 line 7: capital gains carried over from Schedule D.
Form 8960: Net Investment Income Tax (NIIT) calculation if applicable.
Form 1099-B: received from broker showing realized transactions and reported basis (for "covered" securities).
Form 1099-DA: NEW for 2026 — crypto-specific reporting from exchanges.

Strategy Cheat-Sheet

Reduce STCG → LTCG

If you bought 11 months ago and the position is up, hold one more month + one day before selling. The federal-rate gap can be 12+ percentage points (24% STCG → 15% LTCG).

0% LTCG harvest

If your taxable income is below $48,350 single / $96,700 MFJ, sell appreciated long-term positions at 0% federal rate. Re-buy immediately (no wash-sale rule on gains) to step up basis.

Tax-loss harvest at year-end

Offset gains with losses. Top bracket: every $1 of loss saves up to $0.408 in tax. Carry forward losses if they exceed gains + $3,000.

Avoid the NIIT

If you are near the $200K/$250K MAGI threshold, consider HSA/401(k) contributions to drop MAGI below it, eliminating the 3.8% surtax on all investment income.

Calculate Your Capital Gains Tax

Use LevyIO's free calculators to estimate exact tax owed by combining federal + state + NIIT for your scenario:

→ Capital Gains Tax Calculator — enter gain, holding period, income, state for exact result
→ Income Tax Calculator — see how short-term gains stack on ordinary income
→ Tax Bracket Calculator — confirm your marginal bracket

Related Comparisons

Federal vs State Income Tax 2026: how both stack on your paycheck
Traditional IRA vs Roth IRA
Single vs Married Filing Jointly
1099 vs W-2 Tax Treatment
Roth IRA Conversion Strategy
Cost of Living Atlanta vs SF vs NYC vs Seattle (Salario) — relevant for state-tax + capital-gains-by-state planning

FAQ

What is the difference between short-term and long-term capital gains?

Short-term capital gains apply to assets held one year or less and are taxed at your ordinary income rate (10%–37%). Long-term capital gains apply to assets held more than one year and are taxed at preferential rates: 0%, 15%, or 20% based on your income tier for tax year 2026.

How is the holding period calculated?

The holding period starts the day AFTER you acquire the asset and ends the day you sell it. To qualify for long-term treatment, you must hold for at least one year and one day. Inherited assets are automatically long-term.

Are 2026 long-term capital gains rates 0%, 15%, or 20%?

Yes. 0% applies up to $48,350 single / $96,700 MFJ. 15% applies in the middle. 20% applies above $533,400 single / $600,050 MFJ. NIIT 3.8% can stack if MAGI > $200K single / $250K MFJ.

Does the 3.8% NIIT apply to capital gains?

Yes. NIIT applies to BOTH short-term and long-term capital gains if your MAGI exceeds $200K single / $250K MFJ. Top filer: 23.8% LTCG (20% + 3.8%) or 40.8% STCG (37% + 3.8%).

Do all states tax short-term and long-term capital gains the same?

Most states tax both as ordinary income with no preferential treatment. Exceptions: Hawaii (7.25% cap), New Mexico (40% deduction), North Dakota (40%), South Carolina (44%), Wisconsin (30%). Nine no-income-tax states do not tax either.

What is tax-loss harvesting and the wash-sale rule?

Tax-loss harvesting offsets gains by selling losing positions. Net losses up to $3,000/year deduct ordinary income; remainder carries forward. Wash-sale rule disallows the loss if you buy the same or substantially identical security within 30 days before/after the sale.

This guide is informational, not tax advice. Tax brackets and thresholds adjust annually per IRS revenue procedures. Consult a CPA or tax professional for your specific situation. Last reviewed and verified against IRS Rev. Proc. 2025-32 on April 27, 2026.