Capital Gains Tax Strategy Simulator
Model your full 2026 capital gains exposure across every IRS layer. Enter your ordinary income, short-term and long-term positions to see the exact Schedule D netting sequence, progressive bracket stacking, NIIT surtax, and your tax-loss harvesting ROI.
Explore Live Scenarios
Wages, salary, business income — exclude investment gains here
Most states tax capital gains as ordinary income at the top marginal rate
Assets held 12 months or less
ST losses eligible for netting
Assets held more than 12 months
LT losses eligible for harvesting
Special Asset Classes & Adjustments
Futures / regulated options — auto 60% LT / 40% ST split
ST losses blocked by 61-day repurchase window
Gold, art, coins, certain NFTs — 28% federal rate cap
Startup stock federal exclusion — 100% for post-2010 QSBS
Net Short-Term
Assets held 12 months or less
$150,000
Net taxable gains position
Net Long-Term
Assets held more than 12 months
$0
Net gains at preferential rates
Total Tax Exposure
Federal + state capital gains taxes
$45,060
Taxes Saved via Harvesting
Preserved capital via harvesting
$0
Active loss harvesting savings
| Ledger Item | Amount |
|---|---|
| Capital Transaction Netting (IRC §1222) | |
| Gross Short-Term Gains | $150,000 |
| Gross Short-Term Losses | ($0) |
| Net Short-Term Capital Position | $150,000 |
| Gross Long-Term Gains | $0 |
| Gross Long-Term Losses | ($0) |
| Net Long-Term Capital Position | $0 |
| Aggregate Net Capital Position | $150,000 |
| Progressive Bracket Stacking Floors | |
| Ordinary Income Base | $120,000 |
| Recognized STCG stacking onto ordinary income base | +$150,000 |
| Income Floor for LTCG Rate Determination | $270,000 |
| Modified Adjusted Gross Income (MAGI) | $270,000 |
| Tax Computation — 2026 Rates | |
| Short-Term Capital Gains Tax (ordinary income brackets) | $42,400 |
| NIIT Base — lesser of $150,000 gains or MAGI overflow above $200,000 | $70,000 |
| 3.8% NIIT Surtax (IRC §1411) | $2,660 |
| Active Tax-Loss Harvesting ROI Analysis | |
| Baseline Tax Exposure (no loss positions, same state) | $45,060 |
| Optimized Total Tax (federal + state) | $45,060 |
| Total Taxes Saved via Active Harvesting | $0 |
| Net Capital Gains Tax Position | $45,060 |
The IRS separates capital gains into two categories based on how long you held the asset before selling. Short-term gains, from assets held one year or fewer, are taxed as ordinary income and flow directly onto your existing wages and business income, reaching as high as 37% in 2026. Long-term gains, from assets held longer than a year, receive preferential rates of 0%, 15%, or 20% depending on your total income position.
The real tax cost of selling short-term positions
Short-term capital gains are one of the most expensive tax events available to investors and traders. A single investor earning $120,000 in ordinary income who cashes out $150,000 in crypto or stock held under one year now has $270,000 in combined taxable income. The marginal rate on the upper portion of that $150,000 gain reaches 32% or 35% depending on exact bracket placement. The stacking is mechanical and the IRS gives no relief for the speed of the trade.
| Income Layer | 2026 Rate | Applies Above |
|---|---|---|
| Ordinary Income (Single) | 10% to 37% | $0 |
| LTCG Preferential — 0% Bracket | 0% | $0 floor |
| LTCG Preferential — 15% Bracket | 15% | $49,450 |
| LTCG Preferential — 20% Bracket | 20% | $545,500 |
The single most effective move for active traders is to delay asset sales past the one-year holding mark wherever possible. A position held 366 days instead of 364 days shifts the entire gain from 22% or 24% ordinary rates down to 0% or 15% preferential LTCG rates. That is a tax reduction requiring no additional planning, no complex structures, and no professional fees.
How the asymmetric cross-netting rules work on Schedule D
The IRS Schedule D netting process runs in two stages. First, all short-term transactions are combined to produce a single net short-term figure. Then all long-term transactions are combined separately. If both produce net gains, each is taxed under its applicable rate structure. If one category produces a net loss and the other a net gain, the IRS combines them before applying any rates.
The asymmetry benefits taxpayers in a specific way. A net short-term loss can cancel out a net long-term gain, and the surviving gain retains its long-term character for preferential rate treatment. If both categories end in a net loss, the aggregate is subject to the $3,000 annual deduction cap under IRC §1211(b). Losses beyond that cap carry forward to the following tax year.
The NIIT surtax and when it triggers
The 3.8% Net Investment Income Tax under IRC §1411 is a separate layer that activates once your Modified Adjusted Gross Income crosses $200,000 for single filers or $250,000 for married filing jointly. The surtax applies to the lesser of your total net recognized capital gains or the dollar overflow above the MAGI threshold. A high-income investor liquidating a large position can owe both the 20% LTCG rate and the full 3.8% NIIT simultaneously on the same dollars, producing an effective federal rate of 23.8% on the top tier of long-term gains.
Tax-loss harvesting and the substituted basis
Every tax-loss harvest you execute today shifts the tax recognition event forward in time. When you sell a losing position and take a comparable replacement, the cost basis of your new holding reflects the purchase price of the replacement. If the replacement subsequently appreciates and you eventually sell it, you recognize that gain at whatever rates apply in that future year. This is not a tax elimination strategy. It is a time-value-of-money optimization. The simulator above quantifies that benefit by comparing your baseline tax exposure against your optimized harvested position.
What is the difference between short-term and long-term capital gains?
Short-term capital gains apply to assets sold after holding them for 12 months or fewer. The IRS taxes these at the same graduated ordinary income rates as wages, which can reach 37% at higher income levels. Long-term capital gains apply to assets held more than 12 months. These qualify for preferential rates of 0%, 15%, or 20% depending on where your total taxable income falls relative to the 2026 IRS thresholds for your filing status.
How does progressive bracket stacking actually work for capital gains?
The IRS stacks each income layer on top of the previous one. Your ordinary income occupies the lowest portion of the income ladder. Short-term gains stack directly on top of that base and get taxed at the ordinary rates that apply to that higher range. Long-term gains then stack on top of the combined ordinary plus short-term floor. The preferential LTCG rate you pay is determined by where that combined floor sits relative to the 2026 LTCG bracket thresholds.
When does the 3.8% NIIT surtax apply to my capital gains?
The Net Investment Income Tax under IRC Section 1411 activates once your Modified Adjusted Gross Income exceeds $200,000 for single filers or $250,000 for married filing jointly. The 3.8% surtax applies to the lesser of your total net recognized capital gains or the dollar amount by which your MAGI exceeds the applicable threshold. It operates as a separate layer on top of your regular capital gains tax, not as a replacement for it.
How does tax-loss harvesting reduce what I owe?
Tax-loss harvesting means deliberately selling positions sitting at a loss to offset your realized gains for the year. Short-term losses first offset short-term gains. Long-term losses first offset long-term gains. If one category produces a net loss, it then crosses over to offset net gains in the other category. Every dollar of gain you eliminate through harvesting saves you the tax you would have owed on it, including any NIIT surtax on that portion.
What is the $3,000 capital loss deduction and the 2027 carryover?
If your total net capital losses exceed your total net capital gains for the year, you cannot claim the full loss immediately. The IRS allows you to deduct up to $3,000 of net capital losses against your ordinary income on your current year return. Any amount above that $3,000 cap carries forward to the following tax year as a 2027 capital loss carryover and can offset future gains or generate another $3,000 ordinary income deduction at that time.
Can short-term losses offset long-term gains and vice versa?
Yes. The IRS Schedule D cross-netting rules allow losses in one category to offset gains in the other once each category has been internally netted. If your net short-term position is a $10,000 loss and your net long-term position is a $30,000 gain, the short-term loss reduces your recognized long-term gain to $20,000. That remaining $20,000 retains its long-term character and qualifies for preferential LTCG rates.