Capital gains

A capital gain is just the profit when you sell something for more than your cost basis, which is basically what you paid for it. If you sell for less, it's a capital loss.

How long you held it matters a lot. If you held it for more than one year, it's a long-term gain, and for 2026 that's taxed at the 0%, 15% or 20% federal rates depending on your income. If you held it for one year or less, it's short-term, and it's taxed at your ordinary income tax rate, the same as your paycheck. Higher earners can also owe the 3.8% net investment income tax on top.

If your losses are bigger than your gains for the year, you can use up to $3,000 of the net loss against your ordinary income, or $1,500 if you're married filing separately, and carry the rest forward to future years.

For you, the timing of a sale can change your tax bill quite a bit, and none of this applies inside an IRA or 401(k), where gains aren't taxed year to year.

Example. As an example, say you paid $1,000 for some shares and sold them for $1,500. Your gain is $1,500 minus $1,000, which is $500. If you held them more than a year and you're in the 15% long-term bracket, the federal tax is $500 times 15%, which is $75. If you held them a year or less and you're in the 22% bracket, it's $500 times 22%, which is $110.

Where I talk about it

• Should I Sell My Stocks Now? Ask These 6 Questions First. at 2:53
• Tax-Loss Harvesting: What a $6,000 Loss Can Actually Save You at 0:00
• Covered Call ETFs Explained (QYLD, JEPI, JEPQ) at 6:16

Try it with your own numbers

• Tax on selling a stock calculator

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Related terms

Tax-loss harvesting Wash sale rule Roth IRA

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