Capital Gains Tax for Married Couples: Brackets, Home Sales, and Basis

Capital gains tax for married couples turns heavily on one choice: filing jointly or separately. For 2026, a couple filing jointly pays 0% on long-term capital gains while taxable income stays at or below $98,900, 15% up to $613,700, and 20% above that.¹ Filing separately cuts every one of those thresholds in half. Couples also get a $500,000 exclusion on the sale of a primary residence, a higher surtax threshold, and several basis rules that can wipe out decades of appreciation when one spouse dies.

2026 Long-Term Capital Gains Brackets for Married Couples

Long-term gains come from assets held more than one year and are taxed at 0%, 15%, or 20%. Short-term gains, on assets held a year or less, are taxed as ordinary income at rates up to 37%.²

For 2026, the long-term rates for married filing jointly apply as follows:¹

0% on taxable income up to $98,900
15% on taxable income from $98,901 to $613,700
20% on taxable income above $613,700

Married filing separately gets exactly half at each break: 0% up to $49,450, 15% up to $306,850, and 20% above that.¹

Where filing separately hurts most is on lopsided income. A couple with $400,000 in combined taxable income sits in the 15% bracket on a joint return. Split evenly on separate returns, each $200,000 share still lands in 15%. But if one spouse earns $350,000 and the other $50,000, filing separately pushes the higher earner past $306,850 and taxes part of any gains at 20% that would have stayed at 15% jointly.

The 3.8% Net Investment Income Tax

Higher earners pay an extra 3.8% Net Investment Income Tax on top of the regular capital gains rate. It applies to the lesser of net investment income or the amount by which modified adjusted gross income exceeds the filing-status threshold. Joint filers cross the threshold at $250,000; married filing separately at $125,000.³ Those thresholds are set by statute and do not adjust for inflation, so more couples cross them each year.

Combined, the NIIT lifts the effective federal rate on long-term gains to 18.8% in the 15% bracket and to 23.8% at the top.⁴ Couples subject to it report the surtax on Form 8960.⁵

Selling Your Home: The $500,000 Exclusion

Married couples filing jointly can exclude up to $500,000 of gain on the sale of a primary residence. Single filers get $250,000.⁶ For most couples, that erases the taxable gain entirely. To claim the full $500,000:

At least one spouse must have owned the home for at least two of the five years before the sale.
Both spouses must have used the home as their primary residence for at least two of those five years. Those two years don’t have to be consecutive.
Neither spouse can have claimed the exclusion on a different sale in the prior two years.

Gain above $500,000 gets taxed at the applicable long-term rate, and that excess also counts as net investment income for the 3.8% NIIT if your MAGI is over the threshold.⁴

Surviving Spouse Window

A surviving spouse can still claim the full $500,000 exclusion if the home is sold within two years of the other spouse’s death and the ownership and use tests were met just before the death.⁶ After that window closes, the survivor files as single and the exclusion drops to $250,000.

Partial Exclusion for Early Sales

Selling before hitting the two-year mark can still qualify for a reduced exclusion if the sale is driven by a job move, a health condition, or certain unforeseen circumstances. The exclusion is prorated based on how much of the two-year period you completed. A couple who lived in the home 15 months before a qualifying job transfer, for example, could exclude up to $312,500 (15/24 of $500,000).⁶

Nonqualified Use

If the home was a rental or second home before you moved in, the share of gain tied to that nonqualified use period cannot be excluded. The taxable share equals the ratio of nonqualified use time to total ownership time. Time after the home stopped being your primary residence doesn’t count against you, and neither do absences of up to two years for health, job changes, or unforeseen events.⁷

Basis Rules That Are Unique to Married Couples

Your gain is the sale price minus your adjusted basis. Two spouse-specific basis rules can change a tax bill by six figures.

Transfers Between Spouses and in Divorce

Property transferred from one spouse to the other during marriage triggers no gain or loss. The receiving spouse takes the same adjusted basis the transferring spouse had, and the holding period carries over. The same treatment applies to transfers incident to divorce, meaning transfers within one year of the divorce or related to ending the marriage.⁸

The trap in divorce is the built-in gain. Take a rental property worth $500,000 that your ex-spouse originally bought for $150,000. You receive it in the settlement and inherit that $150,000 basis. Selling it triggers a $350,000 gain that existed before you ever owned the property. Current value tells you nothing about the tax bill hiding inside it.

Step-Up in Basis When a Spouse Dies

When a spouse dies, property acquired from the decedent generally gets a new basis equal to its fair market value on the date of death.⁹ How much of the property qualifies depends on where you live.

In common law states (the majority), only the deceased spouse’s half of jointly owned property steps up. The survivor’s half keeps its original basis. Take a home the couple bought for $200,000 that is now worth $800,000. The surviving spouse’s new basis is roughly $500,000: the original $100,000 basis on their half plus the stepped-up $400,000 on the deceased spouse’s half.

Community property states give a full step-up: the entire asset resets to fair market value, not just the deceased spouse’s half.⁹ Using the same example, the survivor’s basis becomes the full $800,000. That eliminates decades of appreciation in a single event and often lets the survivor sell without owing federal capital gains tax.

Special Rates for Certain Assets

Not every long-term gain fits the standard 0/15/20% rates.

Collectibles like art, coins, and antiques are taxed at a maximum long-term rate of 28%.²
Depreciation recapture on real estate is taxed at a maximum rate of 25% on the portion of gain attributable to depreciation you previously claimed.²
Qualified small business stock held more than five years, acquired after September 27, 2010, can qualify for a 100% exclusion up to the greater of $10 million or ten times basis.¹⁰

The QSBS exclusion is per issuer, so each spouse can potentially claim a separate exclusion on shares of the same company. That doubles the shelter for couples who invested early in a startup that later took off.

Losses, the $3,000 Cap, and Wash Sales Between Spouses

When capital losses outpace gains for the year, a joint return can deduct up to $3,000 of the excess against ordinary income. Filing separately, the limit is $1,500 per spouse. Unused losses carry forward indefinitely.¹¹ The $3,000 cap is set by statute and does not adjust for inflation.

Tax-loss harvesting works by selling a losing position, taking the deduction, and reinvesting. The wash sale rule blocks the loss if you repurchase substantially identical securities within 30 days before or after the sale. Courts have held that the wash sale rule itself applies to the individual taxpayer, not directly to a spouse. That does not clear the way for one spouse to sell at a loss while the other buys the same stock. The IRS can disallow the loss under related-party rules if the pair of trades is effectively an indirect transaction between spouses, and the Supreme Court has done so where a husband managed his wife’s account and coordinated the matching trade. Treat a spouse’s account the same way you’d treat your own for wash sale purposes.

Carryover Losses Die With the Spouse Who Owned Them

A capital loss carryover belongs to the taxpayer who generated it. If a spouse dies with unused carryovers, they can be used on the final joint return for the year of death, but they do not pass to the surviving spouse in later years. A deceased spouse with $50,000 in accumulated carryovers who can only absorb $3,000 on the final return loses the remaining $47,000 outright. If sizeable carryovers exist, realizing offsetting gains before the year of death ends is often the last chance to use them.

Estimated Tax After a Big Gain

A large gain during the year can create an underpayment penalty if withholding doesn’t keep up. You generally need to have paid in at least 90% of the current year’s tax or 100% of last year’s tax through withholding and estimated payments. If prior-year AGI exceeded $150,000 ($75,000 if married filing separately), the prior-year safe harbor rises to 110%.¹²

For a one-time event like selling a business or a concentrated stock position, you can annualize income and make a larger estimated payment for just the quarter the gain hit, avoiding overpayment in quieter quarters. Publication 505’s Annualized Estimated Tax Worksheet handles the math, and Form 2210 with Schedule AI attached to the return shows the IRS why the payments were uneven.¹³

If One Spouse Is a Nonresident Alien

If one spouse is a U.S. citizen or resident and the other is a nonresident alien, the couple can elect to file jointly by attaching a signed statement declaring both spouses will be treated as U.S. residents for tax purposes. The nonresident spouse needs a Social Security Number or ITIN.¹⁴

The election unlocks the wider joint brackets, the $500,000 home sale exclusion, and the higher $250,000 NIIT threshold. In exchange, both spouses must report worldwide income to the IRS from that point forward, including any foreign capital gains, foreign accounts, and foreign rental income. Weigh the bracket savings against the compliance burden before making the choice.¹⁴

1
Internal Revenue Service. Revenue Procedure 2025-32
2
Internal Revenue Service. Topic No. 409, Capital Gains and Losses
3
Internal Revenue Service. Net Investment Income Tax
4
Internal Revenue Service. Questions and Answers on the Net Investment Income Tax
5
Internal Revenue Service. 2025 Instructions for Form 8960
6
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
7
Office of the Law Revision Counsel. 26 US Code 121 – Exclusion of Gain From Sale of Principal Residence
8
Office of the Law Revision Counsel. 26 USC 1041 – Transfers of Property Between Spouses or Incident to Divorce
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Office of the Law Revision Counsel. 26 US Code 1014 – Basis of Property Acquired From a Decedent
10
Office of the Law Revision Counsel. 26 US Code 1202 – Partial Exclusion for Gain From Certain Small Business Stock
11
Office of the Law Revision Counsel. 26 US Code 1211 – Limitation on Capital Losses
12
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
13
Internal Revenue Service. Large Gains, Lump Sum Distributions, Etc.
14
Internal Revenue Service. Nonresident Spouse