If you make $500,000 from your jobs as a married couple AND take long term capital gains of $98,900 in 2026 are those gains still taxed at 0% while the W2 earnings are taxed at the normal IRS tax levels for $500,000?
For simplicity, assume no deductions.
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Posted by FeistyTicket7556
5 Comments
No that would add to your total income so your income would be 598k. So it would fall under 15% tax rate. That 98k would be 0 assuming you made zero income outside of that. But if you both have jobs that’s included as well
No. Federally, your capital gains would be taxed at 18.8% (15% capital gain tax + 3.8% NIIT surtax). Taxation at state level varies on the state.
Long story short, the capital gains income are taxed *after* W-2 income, not before.
No, your wages go first, then the LTCG goes on top.
If you don’t want to screw with the worksheet, there’s a much quicker way:
1) Use the long-term brackets to calculate the tax on you *entire taxable income*. Call this A.
2) Subtract your long-term gain from your total income. Call this B.
3) Now calculate your tax with the long-term brackets on B. Call this C.
4) D = A – C
5) Calculate your tax on B using the normal tax brackets. This is E.
Your total tax is D + E.
The tax code layers gains above regular income in the capital gains tax worksheet. So regular income like Social Security or W2 can push your gains into a higher bracket.