2027 Capital Gain Tax Rates — New Brackets

As most taxpayers know, under the federal income tax rates, ordinary income can be taxed in 2027 at a rate as high as 37%. However, because some income accumulates over time, in the sense of the fair market value of an asset appreciating, Congress provided for a lower rate on income produced when there is a sale of a capital asset investment where that asset is held for a period in excess of one year.

(For more on this issue, see Real Estate Transactions, Tax Planning, by Mark Lee Levine and Libbi Levine Segev, Chapter 8 (2026) and published by Thomson Reuters West.)

Each year the IRS issues new tax tables that state the rates as to how much a given amount of net income will be taxed. The highest tax rate for ordinary income to be taxed, such as salary, commissions, and other earned income, is 37%. The highest rate of tax on long-term capital gain, as mentioned above, is, without discussing a few exceptions, 20%. Further, most long-term capital gain is taxed for most taxpayers at less than 20%; often such gains are taxed at 15%.

Recently, the new brackets for taxing such gains in 2027, according to calculations by Thomson Reuters West, show the following rates:

There is no tax on adjusted long-term capital gains under the following settings:

• Joint returns and surviving spouses: $102,100

• Single filers and married taxpayers filing separately: $51,050

• Heads of household: $68,350

• Estates and trusts: $3,400

  
  

If the gain exceeds the amounts noted, the rate is 15%. This applies to:

• Joint returns and surviving spouses: $633,600

• Married taxpayers filing separately: $316,800

• Single filers: $563,200

The above means that, for example, a joint return filed by spouses having adjusted net capital gain of an amount not in excess of $633,600 would pay at 15% on the adjusted net capital gain in excess of the amounts noted above that pay no tax on the capital gain. With this larger amount, it is clear why most taxpayers filing jointly do not pay at the 20% rate; rather they pay at the 15% rate.

The 20% capital gains tax rate applies to adjusted net capital gain in excess of the amounts subject to the 15% rate.

Therefore, when taxpayers are comparing tax rates of ordinary income as opposed to capital gain rates, the spread is obvious. There is a 22% difference between the 15% bracket and the 37% bracket!! (Taxpayers filing a joint return in 2027 will reach the highest 37% bracket with ordinary taxable income of $793,650.)

With the new rates applying in 2027, taxpayers should be projecting, now, to determine their tax liability for 2027 and to plan for estimate payments, methods to reduce income for 2027, where applicable, and to otherwise anticipate the impact of the new tax schedules.

By

Dr. Mark Lee Levine, Professor, University of Denver.