Published 2026-07-07 · Optimist Tax Advisors
The tax on a sale is a stack of layers, and quoting any one layer understates the bill. Here is the full stack for 2026.
Assets held longer than one year are taxed at 0%, 15%, or 20% federally, with the 20% bracket beginning at roughly half a million dollars of taxable income for single filers (thresholds are indexed annually). Most sellers with meaningful gains are at 20%.
A 3.8% surtax applies to investment income above $200K of modified adjusted gross income (single) or $250K (married filing jointly). These thresholds are not indexed, so nearly every significant sale triggers it. Practical top federal rate on long-term gains: 23.8%.
Assets held one year or less are taxed as ordinary income, up to 37% federally, plus the 3.8% surtax: 40.8% before state tax. The single cheapest planning move available is often just crossing the one-year line.
States tax capital gains as ordinary income, at rates from zero to over 13%. California's top rate exceeds 13% with no preferential gains rate. New York's top state rate is roughly 10.9%, and New York City residents add a local layer that pushes the combined state-and-city figure toward 15%. Eight states, including Texas, Florida, and Washington (which instead levies a separate 7% excise on large gains), have no conventional income tax on wages, though treatment of gains varies.
A top-bracket California seller of long-term stock faces roughly 37% combined. A Texas seller of the same stock faces 23.8%. The gap between them, and the gap between long-term and short-term treatment, is the raw material most capital gains planning works with: timing, residency, character, and the deferral and exclusion structures covered elsewhere on this site.
A first meeting covers your situation, the strategies that plausibly apply, and what we would need to review before recommending anything.
Schedule a Conversation