Question 1

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

Accepted Answer

Short-term capital gains (assets held 365 days or less) are taxed at your ordinary income tax rate, which ranges from 10% to 37% in 2026. Long-term capital gains (assets held 366 days or more) are taxed at preferential rates: 0%, 15%, or 20%, depending on your income. For most taxpayers, the long-term rate is 15%.

Question 2

What are the 2026 long-term capital gains tax brackets?

Accepted Answer

For 2026, the LTCG brackets are: 0% for taxable income up to $47,025 (single) or $94,050 (married filing jointly); 15% for income up to $518,900 (single) or $583,750 (MFJ); 20% for income above those thresholds. These brackets are adjusted annually for inflation.

Question 3

What is the Net Investment Income Tax (NIIT)?

Accepted Answer

The NIIT is a 3.8% surtax on investment income (including capital gains, dividends, interest, and rental income) for taxpayers with modified AGI above $200,000 (single) or $250,000 (married filing jointly). It applies to the lesser of your net investment income or the amount by which your MAGI exceeds the threshold.

Question 4

Do states tax capital gains?

Accepted Answer

Most states tax capital gains as ordinary income at their standard income tax rates. Nine states have no income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. California has the highest top rate (13.3%) on capital gains.

Question 5

How is crypto taxed?

Accepted Answer

The IRS treats cryptocurrency as property. Selling crypto for a profit triggers capital gains tax, just like stocks. Short-term if held 365 days or less, long-term if held 366+ days. Using crypto to purchase goods or services also triggers a taxable event. Mining income is taxed as ordinary income.

Question 6

Can I offset capital gains with losses?

Accepted Answer

Yes. You can use capital losses to offset capital gains dollar-for-dollar. If your losses exceed your gains, you can deduct up to $3,000 per year against ordinary income ($1,500 if married filing separately) and carry forward remaining losses to future years.

Question 7

How can I reduce my capital gains tax?

Accepted Answer

Strategies include: (1) Hold assets for 366+ days to qualify for long-term rates. (2) Harvest tax losses to offset gains. (3) Use a 1031 exchange for investment real estate. (4) Gift appreciated stock to charity. (5) Invest through tax-advantaged accounts (IRA, 401k) where gains are tax-deferred or tax-free.

Question 8

What happens if I do not report capital gains?

Accepted Answer

Brokerages report your sales to the IRS via Form 1099-B. Crypto exchanges issue Form 1099-DA starting in 2026. Failing to report capital gains can result in IRS penalties, interest, and potential audit. The IRS matches 1099 forms to your tax return automatically.

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