2016 Capital Gains Tax Rate
For 2016, the Capital Gains Tax Rate is 15% (Rate above the 0% bracket) and 20% (Rate above the 15% bracket).
Effective 2016-01-01Source: Publication 550 (2016), Investment Income and Expenses (IRS)Verified 2026-08-31
Who it applies to
Individuals with a net capital gain from selling investment property held for more than a year, and taxpayers reporting qualified dividends, which the same rates apply to.
What changed this year, and why
For 2016 the rate on a net capital gain is set by the ordinary income tax rate that would otherwise apply to the same income. Where that ordinary rate sits in the middle of the schedule the gain is taxed at 15%, and where it sits at the top of the schedule the gain is taxed at 20%. Publication 550 states no dollar breakpoints of its own for these bands, because before the Tax Cuts and Jobs Act the bands were bounded by the ordinary brackets rather than by amounts of their own.
Common questions
- What was the long-term capital gains rate for 2016?
- It depended on the ordinary income tax rate that would otherwise have applied to the same income. Publication 550's own table gives 15% where that ordinary rate is in the middle of the schedule and 20% where it is at the top of it.
- Why does this page show no dollar thresholds for 2016?
- Before the Tax Cuts and Jobs Act the capital gain bands had no dollar breakpoints of their own. They were bounded by the ordinary income brackets, so there is no separate amount for the IRS to state, and this site publishes no figure a document does not state.
- Do these rates apply to a gain on something held for less than a year?
- No. A short-term capital gain is taxed as ordinary income at the taxpayer's own bracket rate. Only a net long-term capital gain gets the rates on this page.
What the lower rates actually apply to
For 2016, the IRS applies its lower capital gain rates to your "net capital gain," which is the amount your net long-term capital gain exceeds your net short-term capital loss. The maximum capital gain rates for 2016 are 0%, 15%, 20%, 25%, and 28%, with the 15% and 20% rates kicking in at higher income thresholds. Certain categories of gain, such as gain from collectibles and eligible gain from qualified small business stock, fall into the 28% rate group; unrecaptured section 1250 gain is taxed at a 25% rate. If using the capital gain rates produces a higher tax than the regular computation would, the regular tax computation applies instead. When you claim a deduction for investment interest, you may have to reduce the net capital gain that is eligible for these lower rates. The rates apply on the IRS return for taxpayers who have net long-term capital gains in excess of net short-term capital losses and who have taxable income greater than zero.
The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. For 2016, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%.
Publication 550 (2016), Investment Income and Expenses (IRS)
How long you must hold to get the long-term rate
For the IRS in 2016, whether your capital gain or loss is short-term or long-term depends entirely on how long you held the investment property. If you hold investment property more than 1 year, any capital gain or loss is long-term. If you hold the property 1 year or less, it is short-term. The holding period begins the day after you acquired the property and ends on the day you disposed of it. For securities traded on an established market, the holding period runs from the day after the trade date you bought the securities through the trade date you sold them; do not confuse the trade date with the settlement date. Only long-term capital gains qualify for the reduced capital gain rates, so meeting the more-than-one-year holding period is the gateway to the preferential rates. Short-term capital gains, by contrast, are taxed at ordinary income rates, which are generally higher than the capital gain rates.
If you hold invest- ment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss.
Publication 550 (2016), Investment Income and Expenses (IRS)
How much of a loss you can deduct in one year
For the IRS in 2016, when your capital losses exceed your capital gains, you may deduct the net loss against other income, but the deduction is capped. Your allowable capital loss deduction on Schedule D (Form 1040) is the lesser of $3,000 ($1,500 if you are married filing a separate return) or your total net loss shown on line 16 of Schedule D. You can use the total net loss to reduce ordinary income dollar for dollar, but only up to the $3,000 limit in a single year. If your total net loss is larger than the yearly limit, the unused portion is not lost: you may carry it forward to the next tax year and treat it as if you had incurred it in that year. Any part that remains unused may be carried over again to later years until it is completely used up. When carried over, the loss keeps its original character as long-term or short-term.
Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of: $3,000 ($1,500 if you are married and file a separate return), or Your total net loss as shown on line 16 of Schedule D (Form 1040). You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit.
Publication 550 (2016), Investment Income and Expenses (IRS)
The loss you cannot deduct if you buy back in
For the IRS in 2016, losses on sales or trades of stock or securities are not deductible if they occur in a wash sale, unless the loss was incurred in the ordinary course of your business as a dealer. A wash sale happens when you sell or trade stock or securities at a loss and, within 30 days before or after the sale, you buy substantially identical stock or securities, acquire substantially identical stock or securities in a fully taxable trade, acquire a contract or option to buy substantially identical stock or securities, or acquire substantially identical stock for your IRA or Roth IRA. You also have a wash sale if your spouse or a corporation you control buys substantially identical stock. The disallowed loss is added to the cost basis of the replacement stock (except for acquisitions in an IRA or Roth IRA), postponing the deduction until you later dispose of the new stock. The holding period of the new stock also includes the holding period of the stock that was sold.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: 1. Buy substantially identical stock or securi- ties, 2. Acquire substantially identical stock or se- curities in a fully taxable trade, 3. Acquire a contract or option to buy sub- stantially identical stock or securities, or 4. Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.
Publication 550 (2016), Investment Income and Expenses (IRS)
The extra tax on top of the capital gain rate
For the IRS in 2016, the Net Investment Income Tax (NIIT) is an additional 3.8% tax that may apply on top of the regular capital gain rate. The tax is imposed on the lesser of your net investment income or the amount by which your modified adjusted gross income (MAGI) exceeds a threshold based on your filing status. For married taxpayers filing jointly the threshold is $250,000; for married filing separately it is $125,000; for single filers and heads of household it is $200,000; and for qualifying widows or widowers it is $250,000. The NIIT is calculated separately from the capital gain rates but is added to the tax owed on the same return, so the effective tax on investment gains can be higher than the stated capital gain rate alone.
The NIIT is a 3.8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000
Publication 550 (2016), Investment Income and Expenses (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Publication 550 (2016), Investment Income and Expenses (IRS)
- Rate above the 0% bracket
other gain1 and the regular tax rate that would apply is 25%, 28%, 33%, or 35% 15%
- Rate above the 15% bracket
other gain1 and the regular tax rate that would apply is 39.6% 20%