How this number is made
A gain is sale proceeds minus cost basis. Hold the asset more than a year and the federal rate is 0%, 15%, or 20%, depending on the taxable income already on your return. Hold it a year or less and the gain is ordinary income, stacked on top of the bracket you were already in.
- Basis is what you paid, plus commissions, not today’s price.
- Other taxable income is after the standard deduction or itemized deductions, and it does not include this gain. Wages before the deduction will overstate the tax.
- More than one year means the trade date is at least a year and a day after purchase. This form will not count the days for you.
Formula
Gain = proceeds − basis. Long-term tax walks that gain through the 2026 0% / 15% / 20% thresholds that remain after your other taxable income. Short-term tax is ordinary tax on (other income + gain) minus ordinary tax on other income alone.
Worked example
Buy at $10,000 and sell at $25,000 after more than a year. Other taxable income is $60,000, single. The $15,000 gain is all in the 15% long-term bracket, so the tax is $2,250. Held a year or less, that same gain sits in the 22% ordinary bracket and the extra federal income tax is $3,300.
Questions
Why isn’t the whole gain taxed at 15% when my income is low?
The 0% band is used first. A single filer in 2026 pays 0% until taxable income, including the gain, passes $49,450. Only the dollars above that line are taxed at 15%.
What about the 3.8% surtax?
Net investment income tax applies when MAGI is over $200,000 single or head of household, $250,000 joint, or $125,000 married filing separately. Those thresholds are not inflation-adjusted. The row is only as good as the income figure you typed.