Capital Gains Tax for Business Owners: Rates, Harvesting Strategies, and Planning Opportunities

By Yarik Yarosh, CPA ·September 5, 2026 ·Updated September 23, 2026 ·10 min read

Written by Yarik Yarosh, CPA (US & Canada) September 5, 2026 · FL CPA license AC61704 · CPA Ontario

Capital gains are taxed at rates that range from 0% to over 40% depending on the type of gain, the holding period, and the taxpayer’s total income. Understanding these rates and how to manage the timing of gains and losses is essential for business owners who sell business assets, investment properties, or equity interests. Under IRC 1(h), long-term capital gains (assets held more than one year) receive preferential rates of 0%, 15%, or 20%. Short-term gains are taxed as ordinary income at rates up to 37%. The 3.8% net investment income tax under IRC 1411 applies to the lesser of net investment income or the excess of modified AGI over the threshold ($200,000 single / $250,000 MFJ). Certain types of gains have their own rates: collectibles are taxed at a maximum 28%, unrecaptured section 1250 gain (the straight-line depreciation taken on real property) is taxed at a maximum 25%, and qualified small business stock under IRC 1202 can be up to 100% excluded. Tax-loss harvesting (selling losing investments to offset gains) is a year-end strategy that can save thousands in taxes.

✓Key takeaway

2025 capital gains tax rates:

Taxable Income (Single)	Taxable Income (MFJ)	Long-Term Capital Gains Rate
$0-$48,350	$0-$96,700	0%
$48,351-$533,400	$96,701-$600,050	15%
Over $533,400	Over $600,050	20%

Additional taxes on capital gains:

Tax	Rate	Applies To
Net investment income tax (NIIT, IRC 1411)	3.8%	MAGI over $200,000 single / $250,000 MFJ
Collectibles gain (IRC 1(h)(5))	28% (max)	Art, antiques, coins, stamps, precious metals, gems
Unrecaptured section 1250 gain	25% (max)	Straight-line depreciation taken on real property
Qualified small business stock (IRC 1202)	0% on the excluded part (100% for stock acquired after 9/27/2010 and on or before 7/4/2025 and held more than 5 years; for stock acquired after 7/4/2025, 50% at 3 years, 75% at 4, 100% at 5+)	C-Corp stock meeting QSBS requirements

Maximum combined rates:

Type of Gain	Federal Rate	NIIT	State (example: CA 13.3%)	Total
Short-term	37%	3.8%	13.3%	54.1%
Long-term (20% bracket)	20%	3.8%	13.3%	37.1%
Long-term (0% bracket)	0%	0% (if under NIIT threshold)	9.3% or less (CA taxes all gains as ordinary income; 13.3% needs over $1 million of taxable income)	9.3% or less
Collectibles	28%	3.8%	13.3%	45.1%
Unrecaptured section 1250 gain	25% (max)	3.8%	13.3%	42.1%
QSBS (100% exclusion)	0%	0%	Varies by state	0-13.3%

How do you minimize capital gains tax as a business owner?

Hypothetical example

Round numbers. A business owner has the following capital transactions in 2025:

Portfolio of gains and losses:

Asset	Purchase Date	Purchase Price	Sale Price	Gain/Loss	Holding Period
Stock A	Jan 2023	$50,000	$80,000	$30,000 gain	Long-term
Stock B	Mar 2024	$40,000	$25,000	($15,000) loss	Long-term
Stock C	Aug 2025	$20,000	$28,000	$8,000 gain	Short-term
Real estate (rental)	Jun 2015	$300,000	$500,000	$200,000 gain	Long-term
Unrecaptured section 1250 gain (part of the rental gain)				$100,000	(25% max rate)
Business equipment	Apr 2024	$30,000	$12,000	($18,000) loss	Long-term (Section 1231)

Netting rules (IRC 1(h)): Capital gains and losses are netted in a specific order:

Step	Calculation
1. Net short-term gains/losses	$8,000 gain (only short-term transaction)
2. Net long-term gains/losses	$30,000 - $15,000 = $15,000 net LTCG (stocks only)
3. Section 1231 losses	($18,000) (treated as ordinary loss if net Section 1231 is a loss)
4. Real estate gain components	$100,000 unrecaptured section 1250 gain (25% max) + $100,000 capital gain (15/20%)
5. Net capital gain	$8,000 ST + $15,000 LT + $200,000 real estate = $223,000

Tax calculation (assume MFJ, $200,000 other income, so for 2025 the ordinary items fall in the 22% bracket):

Component	Amount	Rate	Tax
Short-term capital gain	$8,000	22%	$1,760
Long-term capital gain (stocks)	$15,000	15%	$2,250
Unrecaptured section 1250 gain	$100,000	25% (max)	$25,000
Long-term capital gain (real estate appreciation)	$100,000	15%	$15,000
NIIT on $223,000 (MAGI of $405,000, after the $18,000 Section 1231 loss, exceeds the $250,000 threshold by $155,000)	$155,000 x 3.8%		$5,890
Section 1231 loss (ordinary loss deduction)	($18,000) x 22%		($3,960) savings
Total tax on capital transactions			$45,940

Tax-loss harvesting strategies:

Strategy	How It Works	Tax Savings
Sell losing positions before year-end	Realize losses to offset gains	Dollar-for-dollar offset against gains
Offset short-term gains first	Short-term losses offset short-term gains (taxed at 37%) before long-term gains (15-20%)	Higher marginal savings
$3,000 excess loss deduction	Net capital losses exceeding gains can offset $3,000 of ordinary income per year	$1,110 savings (37%) per year
Carry forward unused losses	Net capital losses carry forward indefinitely (no limit)	Future year savings
Wash sale rule (IRC 1091)	Can’t repurchase substantially identical securities within 30 days before or after the sale	Loss disallowed if wash sale triggered

Example: Harvesting an additional $30,000 in stock losses before year-end:

Without harvesting	With harvesting
Net capital gains: $223,000	Net gains: $193,000
Tax: $45,940	Tax: ~$40,300
Savings from harvesting	~$5,640

Charitable donation of appreciated property: Instead of selling Stock A ($30,000 gain) and paying tax:

Method	Tax on Gain	Charitable Deduction	Net Benefit
Sell stock, donate cash	$5,700 (15% + 3.8%)	$80,000 (FMV) x 22% = $17,600	$11,900 net
Donate stock directly (held over 1 year)	$0	$80,000 (FMV) x 22% = $17,600	$17,600 net
Additional benefit of direct donation			$5,700

Installment sale (IRC 453) to spread gains:

Feature	Details
How it works	Seller receives payments over time; gain is recognized proportionally as payments are received
Benefit	Spreads capital gains across multiple tax years; may keep taxpayer in lower bracket
Depreciation recapture	Ordinary recapture income (section 1245, or section 1250 depreciation beyond straight-line) is taxed in the year of sale; straight-line unrecaptured 1250 gain on a rental is not recapture income and is reported as payments come in, before the rest of the gain
Interest	Seller must charge at least the Applicable Federal Rate (AFR); interest is ordinary income
Related party sales	Special rules apply (IRC 453(e)); gain may be accelerated if related buyer resells within 2 years

Example: $500,000 real estate sale on installment (5-year note):

Year	Payment	Gain Recognized (40% gross profit ratio)	Tax (unrecaptured 1250 gain first, at up to 25% + 3.8%; then 15% + 3.8%)
Year 1	$100,000	$40,000 (unrecaptured 1250 gain)	$11,520
Year 2	$100,000	$40,000 (unrecaptured 1250 gain)	$11,520
Year 3	$100,000	$40,000 ($20,000 unrecaptured 1250 gain + $20,000 other gain)	$9,520
Year 4	$100,000	$40,000	$7,520
Year 5	$100,000	$40,000	$7,520
Total	$500,000	$200,000 (including the $100,000 unrecaptured 1250 gain)	$47,600

vs. lump sum: the same $47,600 at these rates (but all in Year 1, potentially pushing into higher brackets).

Qualified Opportunity Zone (QOZ) deferral:

Feature	Details
Defer capital gains	Invest gains in a Qualified Opportunity Fund within 180 days
Hold for 10 years	100% exclusion of NEW gains from the QOZ investment
Original gain	Taxable when fund sold or December 31, 2026 (whichever is earlier); for amounts invested after December 31, 2026, when sold or 5 years after the investment
Best for	Large capital gains with a long investment horizon

Illustrative numbers only, not a real client and not advice for your facts.

Can I spread the gain from a business sale over multiple years?

If the buyer pays in installments, you can report the gain proportionally under IRC 453 as you receive each payment. The installment method applies automatically to any sale where at least one payment is received after the tax year of the sale. Each payment consists of three components: return of basis (tax-free), gain (taxed at capital gains rates), and interest income (taxed as ordinary income). Dealer dispositions, sales of inventory, and sales of depreciable property to a related party don’t qualify for installment treatment. If you elect out of the installment method (by reporting the full gain in the year of sale), you cannot reverse that election without IRS consent.

Can I offset capital gains with capital losses from other investments?

Yes. Capital losses first offset capital gains of the same type (short-term losses against short-term gains, long-term against long-term), then any remaining net loss offsets gains of the other type. If net capital losses exceed capital gains, you can deduct up to $3,000 of the excess against ordinary income ($1,500 if married filing separately). Unused losses carry forward indefinitely to future tax years, maintaining their character (short-term or long-term). The wash sale rule (IRC 1091) prevents you from claiming a loss if you repurchase substantially identical securities within 30 days before or after the sale. Tax-loss harvesting before year-end is a common strategy to realize losses that offset gains elsewhere in the portfolio.

Related guides:

Tax-Loss Harvesting for Small Business Owners with Investment Portfolios
Tax-Loss Harvesting for Business Owners: How to Turn Investment Losses Into T…
Capital Gains Tax: Canada vs the US Compared

What are the 2026 capital gains brackets for business owners?

For 2026, long-term gains are taxed at 0% up to $98,900 of taxable income for married couples filing jointly ($49,450 single), 15% up to $613,700 ($545,500 single) and 20% above that. Short-term gains on assets held one year or less stay at ordinary rates, and the 37% top rate, now permanent, starts over $768,700 joint and $640,600 single for 2026.

Head of household ceilings for 2026 are $66,200 for the 0% band and $579,600 for the 15% band. The 3.8% net investment income tax thresholds don’t move with inflation, so they’re still $250,000 joint, $200,000 single and $125,000 married filing separately. The special caps carry into 2026 as well: up to 25% on unrecaptured section 1250 gain from real estate and up to 28% on collectibles.

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Cite this page

Yarik Yarosh, CPA. "Capital Gains Tax for Business Owners: Rates, Harvesting Strategies, and Planning Opportunities." Blue Cloud CPA, September 5, 2026, updated September 23, 2026. https://bluecloudcpa.com/guides/small-business-capital-gains-tax-rates-strategies-harvesting

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.