At a glance
- The tax basis of an asset is not indexed for inflation, Tax Foundation notes, so gains are measured in nominal dollars.
- A sale can therefore produce a taxable gain even where purchasing power has not risen, and in some cases, per the report, taxpayers owe tax on what is, in real terms, a net loss.
- For advisors, the state rate is the variable that travels with the client, changing the after-tax proceeds of a sale without any change in the holdings.
The federal tax code taxes long-term capital gains at 0%, 15% or 20% depending on taxable income.
Thirty states and the District of Columbia tax long-term capital gains at the same rates they apply to ordinary income, Tax Foundation reported in its 2026 review of state capital gains rates. Those jurisdictions do not maintain a separate long-term capital gains schedule for assets held more than a year.
The tax basis of an asset is not indexed for inflation, Tax Foundation notes, so gains are measured in nominal dollars. A sale can therefore produce a taxable gain even where purchasing power has not risen, and in some cases, per the report, taxpayers owe tax on what is, in real terms, a net loss.
For advisors, the state rate is the variable that travels with the client, changing the after-tax proceeds of a sale without any change in the holdings. The state schedule becomes a live input in residency and liquidation planning for low-basis positions held for decades, where inflation can turn a nominal gain into a real loss.
Reported by the Tax & estate planning desk from Tax Foundation. Published . Corrections