NEW YORK, NY — Investors preparing to sell stocks, real estate, or other assets in taxable accounts could face sharply divergent tax bills over the next two years as federal capital gains tax brackets for 2025 and 2026 shift with income thresholds that may leave even savvy taxpayers scrambling to plan, according to a detailed analysis by The Motley Fool reviewed and published by Stacker.
The report explains that long-term capital gains — profits from the sale of assets held more than a year — remain subject to three federal rates: zero percent, 15 percent, and 20 percent. The rate that applies depends on a taxpayer’s income and filing status, meaning two individuals who sell identical assets could owe dramatically different taxes.
For the 2025 tax year, which investors will report when filing returns in 2026, the zero percent rate applies to single filers with taxable income up to $48,350 and married couples filing jointly up to $96,700, with the top 20 percent rate kicking in over $533,400 and $600,500, respectively. For the 2026 year, brackets shift modestly higher: the zero percent threshold for singles rises to $49,450 and $98,900 for joint filers, while the top 20 percent bracket begins at $545,500 and $613,700.
The Motley Fool’s analysis notes that these adjustments stem largely from inflation indexing rather than major tax law changes, leaving the three-tier long-term structure intact. This dynamic means high-earners could still pay significant tax on gains even without new legislation.
Short-term capital gains — profits on assets sold after one year or less — are taxed as ordinary income under the federal system, with rates ranging from 10 percent to 37 percent depending on overall taxable income.
The Stacker presentation of The Motley Fool report also spotlights the patchwork of state rules that further affect investor tax bills. Several states, including Alaska, Florida, Nevada, Texas, and Wyoming, impose no capital gains tax because they have no income tax, while others tax gains at ordinary income rates. California’s top bracket on gains can reach 12.3 percent, New York’s 10.9 percent, and New Jersey’s 10.75 percent, making state liabilities nontrivial for those selling assets in high-tax jurisdictions.
While the core federal framework appears stable, state tax regimes continue to evolve: Mississippi, Nebraska, and North Carolina are expected to reduce top income tax rates by 2026, and Ohio and Oklahoma are cutting theirs as well, potentially lowering capital gains burdens in those states.
Financial planners quoted in the report emphasize that understanding both federal brackets and state rules is critical for timing sales and projecting after-tax proceeds. They note that tax-deferred accounts such as IRAs and 401(k)s shield gains until withdrawal, and strategies like offsetting gains with losses can mitigate tax bills.
The Motley Fool analysis published by Stacker serves as a timely reminder that fast-changing tax parameters could significantly affect investor returns, particularly for those with substantial gains or residing in high-tax states.
For the latest news on everything happening in Chester County and the surrounding area, be sure to follow MyChesCo on Google News and MSN.