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

By Yarik Yarosh, CPA ·September 5, 2026 ·7 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 28%, depreciation recapture under IRC 1250 is taxed at 25%, and qualified small business stock under IRC 1202 can be 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
Depreciation recapture (IRC 1250)	25%	Depreciation taken on real property
Qualified small business stock (IRC 1202)	0% (100% exclusion post-9/27/2010)	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)	13.3% (CA taxes all gains as ordinary)	13.3%
Collectibles	28%	3.8%	13.3%	45.1%
Depreciation recapture	25%	3.8%	13.3%	42.1%
QSBS (100% exclusion)	0%	0%	Varies (CA does not conform)	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
Depreciation recapture				$100,000	(25% 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 depreciation recapture (25%) + $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):

Component	Amount	Rate	Tax
Short-term capital gain	$8,000	37%	$2,960
Long-term capital gain (stocks)	$15,000	15%	$2,250
Depreciation recapture	$100,000	25%	$25,000
Long-term capital gain (real estate appreciation)	$100,000	20%	$20,000
NIIT on $223,000 (MAGI of $423,000 exceeds $250,000 threshold)	$173,000 x 3.8%		$6,574
Section 1231 loss (ordinary loss deduction)	($18,000) x 37%		($6,660) savings
Total tax on capital transactions			$50,124

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: $50,124	Tax: ~$43,500
Savings from harvesting	~$6,624

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 37% = $29,600	$23,900 net
Donate stock directly (held over 1 year)	$0	$80,000 (FMV) x 37% = $29,600	$29,600 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	NOT eligible for installment treatment; all recapture taxed in year of sale
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 (20% + 3.8%)
Year 1	$100,000 + $100,000 dep. recapture	$40,000 capital gain + $100,000 recapture	$9,520 + $25,000 = $34,520
Year 2	$100,000	$40,000	$9,520
Year 3	$100,000	$40,000	$9,520
Year 4	$100,000	$40,000	$9,520
Year 5	$100,000	$40,000	$9,520
Total	$500,000	$200,000 + $100,000 recapture	$72,600

vs. lump sum: $50,124 (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)
Best for	Large capital gains with a long investment horizon

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

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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. 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.