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Capital gains are the profits realized from the sale of assets, such as stocks, bonds, or real estate. These gains are categorized as either short-term or long-term, depending on the holding period of the asset. Short-term capital gains apply to assets held for one year or less, while long-term capital gains apply to assets held for more than one year.
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If you sell stocks, real estate, or any other investment that has gone up in value, you owe tax on the gain. How much depends on where you live, how long you held the asset, and what the tax laws look like that year.
For 2026, there are a few changes worth paying attention to. Federal rates are holding steady, but New York has a new top bracket, and the rules around carried interest are shifting. Here is what it looks like.
At the federal level, the distinction between short-term and long-term gains still applies.
Short-term gains. If you hold an asset for one year or less, the gain is taxed as ordinary income. That means it falls into the same brackets as your wages, ranging from 10 percent up to 37 percent depending on your total income.
Long-term gains. If you hold an asset for more than one year, you get preferential rates. For 2026, those rates are 0 percent, 15 percent, or 20 percent.
The income thresholds for 2026 are:
One change for 2026: the net investment income tax (NIIT) remains at 3.8 percent for high earners, but the thresholds are not adjusted for inflation. That means more people may get caught by it this year.
New York does not give preferential treatment to long-term gains. Capital gains are taxed as ordinary income under the state's progressive brackets. For 2026, the brackets are:
Filing Status | Income Range | Tax Rate |
|---|---|---|
Single | Up to $8,500 | 4.00% |
Single | $8,501 to $11,700 | 4.50% |
Single | $11,701 to $13,900 | 5.25% |
Single | $13,901 to $80,650 | 5.50% |
Single | $80,651 to $215,400 | 6.00% |
Single | $215,401 to $1,077,550 | 6.85% |
Single | $1,077,551 to $5,000,000 | 9.65% |
Single | $5,000,001 to $25,000,000 | 10.30% |
Single | Over $25,000,000 | 10.90% |
For married couples filing jointly, the brackets are roughly double up to the top tiers.
The key change for 2026 is the new 9.65 percent bracket starting at $1,077,550. That catches more high-income earners than in prior years.
So if you sell a business, a large stock position, or a valuable piece of real estate, a portion of your gain could land in the 9.65 percent or even 10.30 percent bracket depending on your total income.
If you live in New York City, you pay an additional local income tax on top of state tax. For 2026, the city rates are:
Filing Status | Income Range | Tax Rate |
|---|---|---|
Single | Up to $12,000 | 3.078% |
Single | $12,001 to $25,000 | 3.762% |
Single | $25,001 to $50,000 | 3.819% |
Single | Over $50,000 | 3.876% |
Married filing jointly thresholds are roughly double.
If you live in Yonkers, you pay a flat 1 percent on top of state tax.
Here is what the combined rate looks like for a high earner in New York City. If you are in the top state bracket of 10.90 percent and the top city bracket of 3.876 percent, you are paying nearly 15 percent in state and local taxes on your capital gains, before you even get to federal.
A few things.
The carried interest loophole closed. For investment fund managers, the preferential treatment of carried interest as long-term capital gains is gone for 2026. Those gains are now taxed as ordinary income at the federal level. New York follows the same treatment since the state taxes gains as ordinary income anyway.
The SALT cap expired. The $10,000 limit on state and local tax deductions for federal returns is gone as of 2026. You can now deduct the full amount of your New York state income tax and property taxes on your federal return if you itemize. That makes the sting of high state and local taxes a little easier to swallow.
No wealth tax passed. Proposals to tax unrealized capital gains in New York have been discussed but did not pass. For now, you only pay tax on gains when you sell.
There are a few ways to reduce what you owe.
Hold assets for over a year. This matters for federal taxes. Short-term rates can hit 37 percent. Long-term rates max out at 20 percent. The difference is significant.
Use tax-loss harvesting. If you have investments that are down, sell them to offset gains elsewhere. You can deduct up to $3,000 of net losses against ordinary income each year and carry the rest forward.
Time your sales. If you are close to a bracket threshold, consider splitting a large sale across two tax years. That can keep more of the gain in a lower bracket.
Donate appreciated assets. Instead of selling stock and donating the cash, donate the stock directly to a charity. You avoid the capital gains tax entirely and still get a deduction for the full fair market value.
Use the primary residence exclusion. If you are selling a home you have lived in for at least two of the last five years, you can exclude up to $250,000 of gain if single, or $500,000 if married. That is a straightforward way to wipe out tax on real estate gains.
If you are selling an investment property, the primary residence exclusion does not apply. But you have another option.
A 1031 exchange lets you defer capital gains tax by rolling the proceeds into a similar property. You have to identify a new property within 45 days and close within 180 days. The rules are strict. If you miss a deadline, the gain is taxable immediately.
For 2026, the rules around 1031 exchanges have not changed, but with higher state tax rates, the value of deferring is greater than it has been in years.
If you are a non-resident and sell real estate in New York, you owe tax to New York on the gain. The state does not let you walk away just because you live elsewhere.
You have to file a New York non-resident return and pay tax at the same rates as residents. You do not owe New York City tax unless you are a resident of the city. But you do owe the state.
There is also a withholding rule. The buyer is required to withhold 8.82 percent of the sale price unless you certify that you are exempt. That withholding gets applied to your tax bill when you file.
For 2026, capital gains are taxed at the federal level based on how long you held the asset, with top rates at 20 percent plus the 3.8 percent NIIT. In New York, gains are taxed as ordinary income, with top rates hitting 10.90 percent. Add New York City tax on top of that, and high earners can face a combined rate approaching 15 percent just for the state and local portion.
The SALT cap is gone, which helps if you itemize. The carried interest rule changed, which affects fund managers. And the top state brackets are higher than they were a few years ago.
If you are sitting on a large gain, it is worth running the numbers before you sell. A little planning: holding longer, harvesting losses, or spreading sales across years, can make a real difference in what you keep.
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