THE HORIZON
Most coverage of this week's tax bracket updates treated them as routine inflation housekeeping, a paragraph buried in a tax-season checklist. For a 15-year builder, adjustments to where brackets sit are rarely routine once compounded across a full accumulation period.
The shift in question: for 2026, the income thresholds separating the 0%, 15%, and 20% long-term capital gains brackets moved higher, and the SALT deduction cap under the One Big Beautiful Bill Act settled at $40,400 with a phase-down above $500,000 in income.
THE EVENT
For the 2026 tax year, the IRS set the 0% long-term capital gains bracket to apply to married couples filing jointly with taxable income up to $98,900, up from $96,700 in 2025. The 20% bracket now begins at $613,700 for joint filers, an increase of more than $13,600 from the prior year.
Separately, the One Big Beautiful Bill Act, signed into law in July 2025, set the SALT deduction cap at $40,400 for 2026, with the elevated cap phasing down for taxpayers whose modified adjusted gross income exceeds $500,000. Both figures are now indexed annually for inflation going forward.
The federal estate tax exemption for 2026 also rose to $15 million per individual and $30 million for married couples filing jointly, reflecting the same OBBBA provisions made permanent last year. Tax professionals at firms including U.S. Bank and Harter Secrest & Emery confirmed the figures apply to the current filing year.
THE PATH
A married couple with $95,000 in taxable income can now realize up to roughly $3,900 more in long-term capital gains before crossing into the 15% bracket, compared with 2025 thresholds. Harvesting gains inside that 0% window, then immediately repurchasing the same position, resets cost basis higher at no tax cost.
Done annually over a 15-year holding period, that basis-resetting habit can meaningfully reduce the eventual tax bill when a larger position is finally sold in retirement. The mechanism works only inside the widened bracket, a detail most year-end tax articles skip.
The $15 million estate exemption is scheduled to persist, but earlier versions of the same exemption were set to halve before OBBBA made the higher figure permanent. A builder transferring a rental property or business interest into a trust this year locks in valuation under today's exemption rather than a future Congress's version of it.
The $40,400 SALT cap primarily helps taxpayers who itemize in high-tax states and earn under the $500,000 phase-down threshold, a group that includes many small business owners paying state taxes on pass-through income. For a business owner near that threshold, the math around incorporating as an S-corp versus staying a sole proprietor shifted slightly this year.
The wider 0% capital gains bracket and any Roth conversion income share the same taxable income ceiling. A builder converting a large traditional IRA balance this year could inadvertently push himself out of the 0% capital gains window he was trying to use, a conflict between two strategies that rarely gets flagged in the same article.
Tax software providers, including TurboTax, updated their 2026 filing calculators this week to reflect the new thresholds, meaning DIY filers will see the wider brackets automatically. Builders working with a CPA should confirm the same update has been applied before finalizing any year-end gain-harvesting trade.
THE WATCH
Watch for the IRS's Revenue Procedure covering 2027 thresholds, typically released each October, and any legislative action on the SALT phase-down before it changes under current law. Also watch first-quarter 2026 brokerage 1099 forms for confirmation of the new basis on any gains harvested this year.
A builder who models one Roth conversion against the new capital gains brackets this month now knows something last week's version of him didn't: exactly where his own income ceiling for the 0% window sits.
Sources
IRS Updates Capital Gains Tax Thresholds for 2026 (Kiplinger): https://www.kiplinger.com/taxes/irs-updates-capital-gains-tax-thresholds
2026 Outlook: OBBBA, Permanent Estate Tax Exemptions, and SALT Deduction Changes (Harter Secrest & Emery): https://hselaw.com/news-and-information/legalcurrents/outlook-the-one-big-beautiful-bill-act-permanent-estate-tax-exemptions-and-salt-deduction-changes/