The question “will Congress raise capital gain taxes?” is becoming one of the most searched tax topics heading into 2026. With major provisions of the Tax Cuts and Jobs Act (TCJA) scheduled to expire on December 31, 2025, investors, financial planners, and business owners are preparing for a potentially significant shift in how investment income is taxed. While no one can say with certainty what Congress will ultimately decide, several political, economic, and legislative factors provide strong clues about what may happen.
The TCJA Sunset: Why 2026 Matters
The TCJA, passed in 2017, lowered individual income tax rates, increased the standard deduction, and adjusted numerous tax brackets. Although the law made many corporate tax changes permanent, most individual tax provisions—including those affecting capital gains indirectly—were temporary. When these provisions expire in 2026, tax brackets will revert to pre‑2018 levels unless Congress acts.
It’s important to note that the TCJA did not directly change long‑term capital gain tax rates. However, it did change the income thresholds that determine which rate a taxpayer pays. When the law sunsets, those thresholds will shift again, potentially pushing more taxpayers into higher capital gain brackets even if Congress does nothing.
This is why the debate over “will Congress raise capital gain taxes” is not only about new legislation—it’s also about whether lawmakers will allow the current rules to expire.
What Happens If Congress Takes No Action?
If Congress does not pass new tax legislation before the end of 2025, several automatic changes will occur:
- Higher ordinary income tax rates, which indirectly affect capital gain thresholds
- Lower income thresholds for the 15% and 20% capital gain brackets
- A reduced standard deduction, increasing taxable income
- The return of personal exemptions, which may offset some increases for certain households
In this scenario, capital gain taxes would effectively rise for many taxpayers not because Congress actively raised them, but because the pre‑TCJA rules would return.
For example, the 20% capital gain bracket would apply at lower income levels than it does today. This means more investors could find themselves paying the top capital gain rate even without legislative action.
Will Congress Raise Capital Gain Taxes Through New Legislation?
The more complex part of the question“will Congress raise capital gain taxes?” involves whether lawmakers will proactively increase rates beyond the automatic TCJA sunset changes. Several factors influence this debate:
1. Federal Revenue Needs
The federal deficit and long‑term debt continue to be major concerns. Some lawmakers argue that increasing capital gain taxes, particularly for high‑income households, could help raise revenue without affecting middle‑income taxpayers.
2. Political Control of Congress
Tax legislation depends heavily on which party controls the House and Senate in 2025 and 2026. Different political groups have sharply different views on capital gain taxation. Some favor keeping rates low to encourage investment, while others support higher rates to increase tax fairness and reduce wealth inequality.
Because of these differences, any major change would require bipartisan negotiation or unified control of Congress.
3. Economic Conditions
If the economy is strong, lawmakers may be more willing to consider tax increases. If the economy is weak or volatile, Congress may avoid raising capital gain taxes to prevent discouraging investment.
4. White House Priorities
The administration’s tax agenda will also shape the debate. Proposals in recent years have included raising the top capital gain rate for high‑income taxpayers, changing the treatment of unrealized gains, and modifying the step‑up in basis at death. Whether these ideas gain traction in 2026 will depend on political dynamics and economic conditions.
Possible Scenarios for 2026
While no prediction is certain, several realistic scenarios could unfold:
Scenario 1: TCJA Sunset With No Additional Changes
Capital gain thresholds revert to pre‑2018 levels. Many taxpayers pay higher rates, but the basic 0%, 15%, and 20% structure remains.
Scenario 2: Congress Extends TCJA Provisions
Lawmakers could extend current thresholds and rates, keeping capital gain taxes roughly where they are today.
Scenario 3: Congress Raises Capital Gain Taxes for High Earners
This could include:
- Increasing the top capital gain rate
- Lowering the income threshold for the 20% rate
- Expanding the Net Investment Income Tax (NIIT)
Scenario 4: Comprehensive Tax Reform
Congress could pursue a broader tax package that includes changes to capital gains, ordinary income rates, deductions, and credits.
What Investors Should Do Now
While the answer to “will Congress raise capital gain taxes” remains uncertain, investors can prepare by:
- Reviewing unrealized gains and potential 2025 harvesting strategies
- Evaluating the timing of major asset sales
- Considering tax‑advantaged accounts
- Consulting with a tax professional before the TCJA sunset
Final Thoughts
Whether Congress will raise capital gain taxes in 2026 depends on political negotiations, economic conditions, and the legislative priorities of the next Congress. What is clear is that the TCJA sunset will reshape the tax landscape even if lawmakers do nothing. Investors should stay informed and work with qualified professionals to prepare for potential changes.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.