Tax Planning · 8 min read
The 0% Capital Gains Bracket in 2026: Where It Ends and How Gains Stack on Top
For 2026, long-term capital gains and qualified dividends are taxed at 0 percent while taxable income, including the gain, stays within $98,900 for joint filers or $49,450 for single filers. Ordinary income fills that space first. With the $32,200 standard deduction, a couple can have about $131,100 of gross income before a gain is taxed.
The capital gains rate schedule starts at zero. Most working households never see that bottom tier, because two salaries fill it before any gain arrives. Retirement changes that. When paychecks stop and required distributions have not yet begun, ordinary income often falls far enough that long-held investments can be sold with no federal capital gains tax at all. The limits are precise, and the way gains stack on top of other income decides how much of a sale actually qualifies.
What follows is educational and covers federal income tax. The treatment of a specific sale should be confirmed with a tax professional.
Chart
2026 long-term capital gains rates by taxable income, married filing jointly
The rate that applies to a gain depends on where it lands on top of other taxable income. The 0% band ends at $98,900.
Source: IRS Rev. Proc. 2025-32, section 4.03 · maximum zero-rate and 15%-rate amounts for 2026 · married filing jointly
View the data
| Rate | Taxable income from | Taxable income to |
|---|---|---|
| 0% | $0 | $98,900 |
| 15% | $98,900 | $613,700 |
| 20% | $613,700 | and up |
What the 0% Question Is Really Asking
“Do I qualify for the 0 percent rate?” is not a yes-or-no question about a household. It is a question about how many dollars of a particular gain fit in the room left under a line, after everything else on the return has been counted. Two households with the same gain can owe very different amounts, and the same household can owe nothing one year and thousands the next, depending on what else lands on the return that year.
The 2026 Thresholds
Gains on assets held more than one year are long-term and taxed at 0, 15 or 20 percent. (IRS Topic No. 409) Revenue Procedure 2025-32 sets where each rate ends for 2026, measured in taxable income that includes the gain. (IRS Rev. Proc. 2025-32, §4.03)
| Filing status | 0% applies up to | 15% applies up to | 20% applies above |
|---|---|---|---|
| Married filing jointly | $98,900 | $613,700 | $613,700 |
| Single | $49,450 | $545,500 | $545,500 |
| Head of household | $66,200 | $579,600 | $579,600 |
| Married filing separately | $49,450 | $306,850 | $306,850 |
Qualified dividends follow the same schedule and the same thresholds. (IRS Publication 550) A taxable brokerage account’s regular dividends may already be landing in the 0 percent tier without a single share being sold.
Because the lines are measured in taxable income, deductions push them higher in gross terms. With the 2026 joint standard deduction of $32,200, the 0 percent tier extends to $98,900 + $32,200 = $131,100 of gross income. For a couple both 65 or older, the $3,300 in age additions and, through 2028, the $12,000 senior deduction raise the deductions to $47,500 and the gross line to $146,400, as long as modified AGI stays at or below $150,000, where the senior deduction starts to phase out. (IRS Rev. Proc. 2025-32, §4.14; 26 U.S.C. §151(d)(5))
Ordinary Income First, Gains on Top
One rule decides everything else: ordinary income, such as pensions, IRA withdrawals, wages and interest, fills the schedule first. Long-term gains and qualified dividends are layered on top. Only the part of a gain that fits below the 0 percent line is taxed at 0 percent.
Take a couple with $60,000 of taxable ordinary income who sell a fund with a $35,000 long-term gain:
- The gain occupies taxable income from $60,000 to $95,000.
- $95,000 is below $98,900, so the entire $35,000 is taxed at 0 percent. Federal tax on the sale: $0.
Now the same sale with $70,000 of taxable ordinary income:
- Room under the line: $98,900 − $70,000 = $28,900 taxed at 0 percent.
- The remaining $35,000 − $28,900 = $6,100 crosses the line and is taxed at 15 percent: $915.
| Taxable ordinary income | Gain | Taxed at 0% | Taxed at 15% | Federal tax on the gain |
|---|---|---|---|---|
| $60,000 | $35,000 | $35,000 | $0 | $0 |
| $70,000 | $35,000 | $28,900 | $6,100 | $915 |
The gain does not push ordinary income into a higher bracket, because ordinary income is always counted first. What changes is how much of the gain fits under the line.
The gain counts toward the same $98,900 line it is tested against. Only the room left after ordinary income is taxed at 0 percent; anything beyond it is taxed at 15.
A Hypothetical Couple, Worked Through
This illustration is hypothetical and simplified. It is not based on any client, assumes 2027 tax figures match 2026 for ease of comparison, and is not a recommendation to buy or sell any security.
A married couple, both 67, has $70,000 of ordinary income from a pension and IRA withdrawals and has not yet claimed Social Security. Their deductions are $47,500, so taxable ordinary income is $22,500 and the federal tax on it is $2,250. They hold a fund with a $120,000 long-term gain and are weighing whether to sell it all in 2026 or half in each of 2026 and 2027.
| Line | Sell all in 2026 | Sell half in 2026, half in 2027 (each year) |
|---|---|---|
| Gain recognized | $120,000 | $60,000 |
| Modified AGI | $190,000 | $130,000 |
| Senior deduction | $12,000 − 12% × $40,000 = $7,200 | $12,000 |
| Total deductions | $42,700 | $47,500 |
| Taxable ordinary income | $27,300 | $22,500 |
| Room under $98,900 | $71,600 | $76,400 |
| Gain taxed at 15% | $48,400 × 15% = $7,260 | $0 |
| Tax on ordinary income | $2,480 + 12% × $2,500 = $2,780 | $2,250 |
| Total federal tax | $10,040 | $2,250 |
Selling everything in one year adds $10,040 − $2,250 = $7,790 to that year’s tax. Spreading the sale adds nothing in either year. Two effects drive the gap. Half the gain overflows the 0 percent tier, and the larger income shrinks the senior deduction, which raises ordinary taxable income and narrows the room further. The one-year sale stays under the $218,000 Medicare surcharge line, so premiums two years later would not change.
Same couple, same $120,000 gain. Recognized in one year, it costs $7,790 in added federal tax; recognized across two years under these assumptions, it costs nothing.
Why Retirees Reach This Bracket More Often
A two-income household rarely has taxable income below $98,900. In the years after work ends and before Social Security and required minimum distributions begin, ordinary income can fall to a fraction of its former level. A position that would have been taxed at 15 percent during working years can pass through the 0 percent tier in the years in between. Two mechanics are worth knowing:
- Selling and buying back resets basis. Realizing a gain and repurchasing the same holding recognizes the gain now and restarts the cost basis at today’s price. The wash-sale rule, which restricts repurchases within 30 days before or after a sale, applies to losses, not gains. (IRS Publication 550)
- The room refills each year. The threshold is an annual test, so a gain too large for one year can be recognized across several. How that fits with other income is a sequencing question, covered in our guide to the order of withdrawals.
How We Approach This in a Plan
We measure the 0 percent room each year alongside the ordinary brackets, because the same space is often wanted for more than one purpose.
- Conversions compete for the same room. A Roth conversion is ordinary income, so it fills the schedule before gains and can erase 0 percent room entirely. We decide which use of the space is worth more; see where the 12 percent bracket ends and when Roth conversions pay off.
- Social Security taxation. A gain taxed at 0 percent still raises provisional income, which can make more of a benefit taxable. (26 U.S.C. §86) See the tax torpedo.
- Medicare premiums. IRMAA surcharges start above $218,000 of joint modified AGI for 2026 and are generally based on the return from two years earlier. (CMS, 2026 Part B premiums; 20 CFR §418.1135) A large gain in 2026 can show up in 2028 premiums; see the IRMAA cliff.
- Estate planning. Assets held until death generally receive a new basis, which can make realizing gains during life unnecessary for some holdings. We weigh the two; see the step-up in basis.
Questions Worth Answering Before You Decide
- What will taxable ordinary income be this year, after pensions, withdrawals, interest and any conversions?
- How much room is left under the 0 percent line, and how large are the unrealized gains in taxable accounts?
- Is Social Security being claimed, and how would a gain change the taxable share of benefits?
- Would the gain move modified AGI past $150,000, where the senior deduction shrinks, or toward the IRMAA line two years out?
- Are any holdings better kept for heirs, given the basis step-up at death?
- How does the state where the household files treat capital gains?
What This Does Not Mean
- It does not mean the gain disappears from income. The full gain enters adjusted gross income, which drives Social Security taxation, IRMAA and the senior deduction phase-out.
- It does not apply to every gain. Short-term gains are ordinary income, and collectibles and certain real estate gains carry their own maximum rates. (IRS Topic No. 409)
- It does not mean no state tax. Most states with an income tax treat capital gains as ordinary income.
- It does not settle whether to sell. Investment merit, concentration, and the value of holding for heirs sit alongside the tax arithmetic.
- It is not personalized advice. The treatment of a particular sale belongs with a tax professional.
At higher incomes, a separate 3.8 percent net investment income tax applies to investment income above $250,000 of modified AGI on a joint return, or $200,000 single, thresholds that are not indexed for inflation. (IRS, net investment income tax Q&A) It rarely overlaps with the 0 percent tier, but it shapes the math for large sales.
Frequently Asked Questions
Q: Where does the 0% capital gains bracket end in 2026?
At $98,900 of taxable income for married couples filing jointly, $49,450 for single filers and married couples filing separately, and $66,200 for heads of household, per IRS Rev. Proc. 2025-32.
Q: Does the gain itself count toward the 0% threshold?
Yes. Ordinary income is counted first and the gain is stacked on top. Only the portion that fits under the line is taxed at 0 percent; the rest is taxed at 15 percent.
Q: How much gross income can a couple have and still pay 0% on gains?
About $131,100 with the $32,200 standard deduction. A couple both 65 or older, with the age additions and the full senior deduction, can reach about $146,400, provided modified AGI stays at or below $150,000.
Q: Are qualified dividends taxed at 0% too?
Yes. Qualified dividends use the same 0, 15 and 20 percent schedule and the same 2026 thresholds as long-term capital gains.
Q: Does the wash-sale rule stop me from buying back after taking a gain?
No. The wash-sale rule applies to losses. Selling at a gain and repurchasing recognizes the gain and resets the cost basis at the new price.
Q: If the federal rate is 0%, is the gain completely tax-free?
Federally, the portion inside the tier is. The whole gain still raises adjusted gross income, which can increase taxable Social Security and, two years later, Medicare premiums. Most states with an income tax also tax it.
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The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.
General educational information, current as of 2026. Figures and rules change. For guidance specific to your situation, speak with a qualified professional.