The Maximum Combined Capital Gains Rate for High Earners
Maximum capital gains tax rates for high earners by location — 2025
| Tax Component | Rate | Applies To |
|---|---|---|
| Federal long-term capital gains (top bracket) | 20% | All LTCG above $533,400 (single) income |
| Net Investment Income Tax (NIIT) | 3.8% | Net investment income above $200K/$250K MAGI |
| State capital gains (California example) | 13.3% | Top California bracket — all capital gains |
| Combined maximum (California top earner) | 37.1% | All components applied simultaneously |
| Combined maximum (Texas — no state tax) | 23.8% | Federal + NIIT only |
| New York City top rate | 34.7% | Federal 20% + NIIT 3.8% + NY state 10.9% |
The Net Investment Income Tax (NIIT) in Detail
The NIIT is a 3.8% surtax on the lesser of net investment income or the excess of MAGI above the threshold. Net investment income includes: interest, dividends, capital gains, rental income (passive), and certain royalties. The NIIT is calculated separately from capital gains tax and applies regardless of whether you are in the 15% or 20% long-term capital gains bracket.
Single filer: $180,000 in wages + $50,000 in long-term capital gains = $230,000 MAGI. NIIT threshold: $200,000. Excess over threshold: $30,000. Net investment income: $50,000. NIIT applies to the lesser: min($30,000, $50,000) = $30,000. NIIT owed: $30,000 × 3.8% = $1,140. Combined capital gains rate on this gain: 15% ($7,500) + 3.8% ($1,140) = $8,640 effective rate of 17.28%.
Strategies to Reduce Effective Rate Below 23.8%
- Maximize 401(k) and HSA contributions to reduce MAGI below NIIT threshold
- Use opportunity zones to defer current gains and eliminate new growth gains after 10 years
- Time large gain realizations to lower-income years (sabbatical, transition, early retirement)
- Harvest losses from other portfolio positions to offset gains
- Donate appreciated assets to charity rather than cash — avoids all gain and generates deduction
- Consider installment sales to spread gain over multiple years at lower brackets
- For California residents: consider relocation timing if gain is very large ($1M+)
- Charitable Remainder Trust: receive income stream, defer gain, receive charitable deduction
AMT Interaction With Capital Gains
The Alternative Minimum Tax (AMT) does not apply additional tax on long-term capital gains directly — LTCG are taxed at the same preferential rates under the AMT as under the regular system. However, large capital gains increase AMTI (Alternative Minimum Taxable Income) and can cause AMT exemption phase-outs, affecting other deductions and potentially triggering AMT on other income types. High-income investors with complex situations should model AMT scenarios specifically.
Calculate Your High-Income Capital Gains Tax
Enter your capital gain and income to see your combined federal, NIIT, and state capital gains tax.