Capital gains tax is the single largest tax bill most investors face — and one of the most optimizable. Understanding the difference between short-term and long-term rates can save $5,000–$30,000 on a significant asset sale.
2026 capital gains tax rates
| Holding period | Rate | Taxed as |
|---|---|---|
| Under 1 year (short-term) | 10–37% | Ordinary income — your marginal rate |
| Over 1 year (long-term, single filer) | ||
| Income ≤ $48,350 | 0% | Zero federal capital gains tax |
| Income $48,351–$533,400 | 15% | Standard long-term rate |
| Income over $533,400 | 20% | High earner rate |
| Married filing jointly — 0% threshold | 0% | Up to $96,700 taxable income |
The 0% bracket: the most underused strategy in investing
If your taxable income (after deductions) is below $48,350 (single) or $96,700 (MFJ), you pay zero federal capital gains tax on long-term gains. This creates powerful strategies:
- "Gain harvesting": Sell appreciated positions, realize gains tax-free, immediately repurchase. You reset your cost basis higher with no tax cost. Repeat annually while in the 0% bracket.
- Early retirement planning: FIRE retirees often structure income to stay within the 0% LTCG bracket — living on $50,000–$90,000 with zero federal capital gains tax.
- Low-income years: Job loss year, sabbatical, or grad school year — ideal time to sell appreciated positions.
Net Investment Income Tax (NIIT): the hidden 3.8%
High earners face an additional 3.8% NIIT on investment income (dividends, capital gains, rental income) above $200,000 (single) / $250,000 (MFJ). Effective capital gains rate at the top: 20% + 3.8% = 23.8%.
Tax-loss harvesting: the year-end strategy
Sell positions with unrealized losses before December 31. Losses offset gains dollar-for-dollar. Up to $3,000 of net losses can offset ordinary income annually. Unlimited carryforward for unused losses. Wash-sale rule: don't repurchase the same (or substantially identical) security within 30 days before/after the sale.
Selling a $50,000 gain position at 11 months (short-term, 22% bracket) vs 13 months (long-term, 15% bracket): difference = $3,500 in taxes. For high earners at 37% vs 20%: $8,500 saved by waiting 2 extra months. Set calendar reminders for every significant position's 1-year anniversary.
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About the author
Enrique 'Kike' Faúndez is an Information Systems and Management Control Engineer from Universidad de Chile, with master’s degrees in Finance from Universidad de Chile and Industrial Engineering from Pontificia Universidad Católica de Chile. He has 15+ years of experience in regulated financial services across finance, operations, and digital product development. He founded CashControlly in Santiago, Chile, with the conviction that personal financial control should not be a privilege, but an accessible and well-designed tool.
- Master's in Finance, Universidad de Chile
- Master's in Industrial Engineering, Pontificia Universidad Católica de Chile
- Information Systems and Management Control Engineer, Universidad de Chile
- AI and ITIL certifications
- 15+ years in regulated financial services
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