The IRS has announced changes to federal capital gains tax brackets for 2026, increasing taxable income thresholds for the more favorable long-term capital gains rates. This development could have considerable impacts on small business sales, especially for closely held businesses, as it shifts tax planning incentives and potentially increases net proceeds for many sellers.
Key Changes for 2026
For the year 2026, the standard deduction will rise to $16,100 for single filers and $32,200 for married couples filing jointly. Notably, the income threshold for qualifying for the 0% long-term capital gains tax rate increases to $49,450 for single filers, and $98,900 for married couples filing jointly. Those above the threshold are subject to long-term capital gains rates of 15% or 20%, depending on overall taxable income.
Impact on Small, Closely Held Business Sales
Owners of closely held businesses often realize significant gains when selling, which are taxed as long-term capital gains if holdings exceed one year. The new thresholds introduce several key considerations:
-
More sellers may qualify for the 0% rate, potentially increasing net proceeds for lower to middle-income business owners.
-
Higher standard deductions mean many sellers can reduce taxable income and avoid higher-tier capital gains rates.
-
Owners with larger sales or higher incomes may still face the 15-25% tax rates, with additional changes anticipated for high-income earners, such as increased top capital gains rates and possible net investment income tax adjustments starting in 2026.
Strategic Considerations for Business Owners
-
Sellers should carefully structure transactions to maximize use of the 0% rate, particularly in asset or share sales where gains are substantial.
-
Efficient tax planning—such as timing the sale and leveraging deductions—offers opportunities to reduce overall tax liability.
-
Closely held business sellers may want to consult with tax specialists, as state taxes and depreciation recapture rules can further affect net proceeds.
The Road Ahead
Raising capital gains thresholds can make selling small businesses more attractive, allowing owners to retain more value from years of work and investment. However, those with high-value sales should be mindful of evolving federal and state tax environments and adapt their sales strategies accordingly.
In sum, the IRS changes for 2026 present substantial planning opportunities and challenges for small, closely held businesses contemplating a sale. Business owners should stay informed and seek professional tax advice to best navigate this shifting landscape.
Michael Shea represents the Tampa Florida Transworld office. In business since 2005, he has established a reputation as a trusted business broker across Florida’s key markets- from Tampa to Orlando, Melbourne, and more. Over the past two decades, Michael and his team have closed over $1 Billion in sold business volume and presided over more than 450 transactions. His credentials include the IBBA Certified Business Intermediary®, and most recently, the prestigious Certified Exit Planning Advisor® (CEPA) credential.