📅 2026 Update: Capital Gains Tax Changes You Should Know

Since the original article was published, there have been significant updates to capital gains tax rates and brackets for 2025. Understanding these changes is crucial for taxpayers, especially those planning to sell assets. The earlier article continues further down the page, providing foundational information on deferring and reducing capital gains taxes.

📊 2025 Capital Gains Tax Rates

For the tax year 2025, the maximum capital gains tax rates are set at 0%, 15%, 20%, 25%, and 28%. The rate you pay depends on the type of asset and your income level. This is a shift from older rates, so knowing your bracket is essential for accurate tax planning.

  • 📈 Unmarried Individuals:
  • 0%: Taxable income up to $48,350
  • 15%: Taxable income from $48,351 to $533,400
  • 20%: Taxable income over $533,400

📅 2025 Capital Loss Deduction Limit

The limit for capital loss deductions remains at $3,000 for individuals and $1,500 for those married filing separately. If your losses exceed this limit, you can carry over the additional losses to future years. This can affect your overall tax situation.

🏠 Taxation of Real Estate Gains

If you sell your primary residence, you may qualify for an exclusion of up to $250,000 of capital gains, or $500,000 for married couples filing jointly. This exclusion applies if you meet certain conditions, making it important to understand when selling your home.

🔍 State Capital Gains Tax Rates

State capital gains tax rates vary. For example, as of January 1, 2024, Arizona has a rate of 1.875%, while Arkansas has a rate of 2.2%. These state rates can significantly impact your overall tax liability, depending on where you reside.

📌 Key Updates Summary

  • 📊 2025 rates are 0%, 15%, 20%, 25%, 28%.
  • 📅 Capital loss deductions are limited to $3,000.
  • 🏠 Primary residence sales may exclude gains up to $250,000.
  • 🔍 State rates vary, impacting tax liability.

💡 Tips for Managing Capital Gains Taxes

Review your personal financial situation with an attorney to ensure you're making informed decisions about your tax obligations.

📝 Keep Accurate Records

Maintaining detailed records of your asset purchases and sales can help you calculate gains and losses accurately. This includes dates, amounts, and any expenses related to the transactions.

🔄 Consider Holding Assets Longer

Assets held for more than one year are generally taxed at lower long-term capital gains rates. If possible, consider holding onto investments longer to reduce tax liability.

📈 Utilize Capital Loss Carryovers

If your capital losses exceed your gains, remember you can deduct up to $3,000 against other income. Carry over any remaining losses to future tax years to offset future gains.

🏡 Understand Real Estate Exclusions

If you sell your primary home, check if you qualify for the capital gains exclusion of up to $250,000 or $500,000 for married couples. This can significantly reduce your tax burden.

📚 Stay Informed on State Taxes

Keep an eye on your state's capital gains tax rates, as they can differ from federal rates. Being aware of these can help you plan your tax strategy better.

🏆 Tax Services Ranked by User Reviews (2026)

The following services assist with tax preparation and filing, focusing specifically on managing capital gains taxes. The ratings are from Trustpilot, as of October 2026, and reflect user experiences. Remember that scores can change, and unhappy customers tend to leave more reviews, which can skew perceptions.

🥇 1. Intuit (TurboTax)

Intuit's TurboTax has been rated 1.2. It is known for its widely used tax preparation software, offering various services that can help with capital gains reporting. However, some users report unexpected charges and software glitches that can complicate the filing process.

🥈 2. TaxSlayer

TaxSlayer holds a score of 4.2. This service is known for its user-friendly interface and affordability, making it easier for individuals to file online. Some reviewers mention unexpected price increases and technical issues, which can affect user experience.

🥉 3. 1040.com

1040.com has an average rating of 4.5. It offers flat-rate pricing and a straightforward tax filing process, ideal for those looking to report capital gains. However, some users feel the platform may be too basic for complex tax scenarios, and there can be occasional technical glitches.

🆓 Free Tax Assistance Options

Taxpayers can benefit from free services such as the IRS Free File Program, which provides free tax preparation and filing for eligible individuals. The Volunteer Income Tax Assistance (VITA) program also offers free help for those needing assistance with their tax returns.

🔎 What to Compare When Choosing a Tax Service

  • 💰 Pricing structure and potential hidden fees.
  • 🖥️ User interface and ease of use.
  • 📞 Customer support availability and responsiveness.
  • 📊 Features for reporting capital gains and losses.
  • 📅 Availability of free assistance programs.

❓ Frequently Asked Questions

❓ What are capital gains?

Capital gains are profits made from selling assets like stocks or real estate. They are typically taxed at lower rates than ordinary income, encouraging investment.

🏠 How can I reduce my capital gains tax liability?

You can reduce capital gains taxes by holding assets for more than one year, utilizing loss carryovers, and taking advantage of exclusions on primary residence sales.

📅 What is the deadline for filing taxes in 2026?

For the 2025 tax year, the deadline to file your tax return is April 15, 2026. If you file for an extension, the final deadline is October 15, 2026.

📈 How do state capital gains taxes work?

State capital gains tax rates vary by state. It's important to check the specific rate for your state, as this can affect your overall tax burden.

📝 What forms do I need to report capital gains?

You typically need Schedule D (Form 1040) to report capital gains and losses, and Form 8949 to report sales and other dispositions of capital assets.

💼 Can I deduct losses from the sale of my primary residence?

No, losses from the sale of a primary residence are generally not deductible. However, you may qualify for an exclusion on capital gains if certain conditions are met.

⚖️ Recent Capital Gains Tax Cases

Recent court rulings have clarified aspects of capital gains taxation. These rulings may influence how taxpayers report and manage capital gains moving forward.

For more recent rulings, you can browse more rulings on the news page.

End of October 2026 Update





Deferring and Reducing Capital Gains Taxes

Capital gains taxes can be an unpleasant surprise for many investors. Taxes can thwart your investment strategy, and leaving them untouched can have a considerable impact on your portfolio’s performance. However, there are ways to defer and reduce capital gains taxes that investors can use to realize higher after-tax returns.

Capital gains taxes are imposed on the profit realized from selling assets such as stocks, real estate, or collectibles. The tax rate for capital gains depends on the length of time the asset has been held and the investor's income. Depending on the investor's tax bracket, the maximum tax rate on long-term capital gains can be as high as 20%.

Planning and being aware of applicable tax rules can help minimize capital gains taxes for investors, allowing them to keep more of their earnings.

In this article, we’ll go through some strategies that you can use to defer and reduce capital gains taxes.

1. Deferring Capital Gains Taxes using 1031 exchanges


One popular strategy investors use to avoid capital gains taxes is a 1031 exchange. A 1031 exchange allows investors to defer taxes on the sale of investment properties by reinvesting the proceeds into a replacement property. The idea behind this is: if an investor sells one investment property, they can use the proceeds to purchase a new investment property without realizing any capital gains taxes.

To be eligible for a 1031 exchange, the following conditions must be met:

• Both the old property and the new property must be considered for investment purposes or productive use in business.
• The investor must follow strict rules and regulations related to proper timing and the amounts involved in the exchange.
• The properties involved must have a similar value.

Additionally, the investor must appoint a Qualified Intermediary (QI) as an independent third party to facilitate the exchange.

One of the benefits of a 1031 exchange is the ability for the investor to compound their investment returns without suffering any tax consequences. Also, there is no limit to the number of times you can use 1031 exchanges to defer capital gains taxes.

2. Deferring Capital Gains Taxes using Opportunity Zone Funds


Opportunity zone funds are a relatively new option included in the Tax Cuts and Jobs Act of 2017. The act was created to help drive investment into certain economically distressed areas. Investors who invest in designated opportunity zones can defer, or in some cases, eliminate capital gains taxes.

Opportunity zones were set up to incentivize investors to invest in low-income areas. Investors are offered a chance to invest capital gains into opportunity zones through opportunity zone funds.

Once invested, the capital gains are deferred until the fund investment is sold, or by December 31st, 2026, at the latest. If the investor holds the investment for at least 10 years, they can make it completely tax-free.

To be eligible for these tax incentives, the investor must invest in a qualified opportunity zone fund, and the fund must invest at least 90% of its total assets in qualified opportunity zone property.

The benefits of opportunity zone funds are clear. Investing in opportunity zone funds is not for everyone, as it comes with risk. Additionally, it requires considerable time, knowledge, and effort to understand the tax code and appreciate the potential benefits of opportunity zone funds.

3. Reducing Capital Gains Taxes through Loss Harvesting


Loss harvesting is an investment strategy that investors can use to realize losses on investments to offset capital gains taxes. To accomplish this, investors sell losing investments and use the capital losses to offset capital gains resulting from the sale of profitable investments.

When this is done, the investor can use the losses to offset the profits that are generated from their other investments. This allows the investor to reduce their overall taxable income within the year, and if the losses exceed gains, this can be carried forward.

Loss harvesting can be done at any time, but usually, investors do this at the end of the year when they have a better understanding of their taxable income.

If you’re looking to reduce your capital gains taxes via loss harvesting, there are three key aspects to keep in mind. First, be aware of the wash-sale rule. Investors have to avoid buying back the same or a substantially identical investment within 30 days after selling it. Secondly, making sure to harvest the right amount of losses or gains depending on your tax bracket is important. Finally, it's essential to use harvesting as part of a larger investment plan to get the most out of the strategy.

4. Reducing Capital Gains Taxes through Charitable Donations


Charitable donations offer investors a way to reduce capital gains taxes while giving back to causes that they care about.

When an investor donates appreciated assets, such as stocks or artwork, to a qualifying charitable organization, they are eligible to write off the fair market value of that asset as a charitable contribution on their tax return.

By doing this, the investor can reduce taxable gains from the asset donated, leading to more tax savings.

The most common type of charitable donation is cash. However, donating appreciated stock or other investments can provide even more significant tax benefits. The charitable organization can sell the donated investment without incurring any capital gains taxes, and the investor who donated the asset can get a tax deduction on their donation.

5. Reducing Capital Gains Taxes through qualified small business stock (QSBS)


Another way that investors can reduce capital gains taxes is through qualified small business stock (QSBS) investing. Companies that qualify as small businesses can offer QSBS. These are shares of stock that qualify for tax incentives when sold.

The Tax Increase Prevention and Reconciliation Act (TIPRA) and the the Jobs Act introduced several provisions that offer preferential tax treatment for QSBS.

There are rules involved in determining if an investment is in qualified small business stock. Some of the rules include:

• The business must actively operate in certain industries, primarily taking part in the development or creation of technology.
• The business must meet requirements related to the amount of assets they have, income, and employees.
• The investor must hold the stock for at least five years.

Investors can exclude up to 100% of capital gains on QSBS they make when they sell. The amount of the exclusion depends on the time they held the investment.

Conclusion


Investors can use these strategies to reduce or delay capital gains taxes and increase their portfolio rate of return. Each strategy has its unique challenges, benefits, and risks. Investors should consult with financial advisors and tax consultants to determine which strategy is best for their investment goals and personal situation.

By learning and implementing these tax deferral and tax reduction strategies, investors can minimize the impact of capital gains taxes on their earnings. Following these strategies can also help investors stay aligned with their investment strategy and achieve long-term financial goals.

There are several ways that investors can lower their capital gains rate of taxes. Whenever possible, investors should take part in long term investments. Long term investments must be held by the investor for at least three hundred and Sixty five days after the date that the investment was purchased.

The day of purchase does not count toward the year. If however, investors sell an investment before that year is up, they will likely have to pay a capital gains rate of taxes that matches their income tax rate. Investors can offset their capital gains rate of taxes by deducting any capital losses. In addition, investors can defer taxes by utilizing the Section 1031 Exchange. There are many ways that investors can reduce or defer capital gain taxes, but their method will depend on their specific circumstances.

When deducting capital losses to adjust a capital gains rate of taxes, investments must be of a similar length. Short term capital losses can be subtracted from short term capital gains and long term capital losses can be subtracted from long term capital gains. The Section 1031 Exchange allows investors to defer capital gain taxes if they take specific actions with the income from their investment. Investors must take their total profit, or capital gain, and invest that money into a similar property, or property that is of similar value to that which was sold.

However, many experts  warn that it can be extremely difficult to find a similar property as a replacement, especially when it is a business. Investors must also find a similar structure, of the same value, within one hundred and eighty days from the date that they made a profit from the other property. In addition to making the purchase within that time frame, there are other rules investors must follow in order to lower their capital gains rate of taxes or to defer those taxes. However, savvy investors should become aware of all of the rules that govern allowances for deferment on capital gains taxes.

In order for investors to defer or reduce their capital gains taxes, they must examine federal and state tax laws that apply to their specific circumstances. Each investor will have circumstances that differ, which means that different laws may apply. In addition, capital gain rate of taxes will vary according to an individuals income, if the profit was made from a short term investment. In order to reduce capital gains taxes, investors must keep records to be sure that they take full deductions for capital gain losses.