Last Updated: April 2026
For investors comparing the US to European alternatives — whether evaluating whether to invest from the US or considering relocation — capital gains tax rates are a critical variable. The US system, while often maligned, compares favourably to many European regimes for long-term investors: a 0% rate for lower-income investors and a 20% maximum federal rate for the highest earners (before state taxes and the 3.8% NIIT).
Europe presents a more complex and varied picture. Germany's flat 25% Abgeltungsteuer applies to virtually all capital income. France's 30% prélèvement forfaitaire unique is straightforward but high. The UK's 18-24% rates are comparable to the US but with very limited annual exemptions since 2024. The Netherlands stands out for its unusual Box 3 'deemed return' system, which taxes investors on assumed investment returns regardless of actual gains — an approach that has faced legal challenges. This guide provides a comprehensive comparison for 2026.
The US distinguishes between short-term capital gains (assets held 1 year or less) and long-term capital gains (assets held more than 1 year):
Short-term capital gains are taxed at ordinary income rates — the same 10-37% progressive brackets as wages and salary. There is no preferential rate for short-term gains.
Long-term capital gains receive preferential rates based on taxable income:
| Filing Status | Taxable Income | Long-Term CGT Rate |
|---|---|---|
| Single | Up to $47,025 | 0% |
| Single | $47,026 – $518,900 | 15% |
| Single | Over $518,900 | 20% |
| MFJ | Up to $94,050 | 0% |
| MFJ | $94,051 – $583,750 | 15% |
| MFJ | Over $583,750 | 20% |
The 0% long-term CGT rate is particularly valuable for middle-income investors: a single filer earning $60,000 in wages but with $20,000 in long-term capital gains may pay 0% federal CGT on the gains (if taxable income including gains remains below the 15% threshold). This zero-rate bracket is one of the most underutilised tax planning opportunities in the US.
| Country | CGT Rate | Annual Exemption | Notes |
|---|---|---|---|
| USA | 0% / 15% / 20% (LT) + 3.8% NIIT | None federally | Plus state tax (0-13.3%) |
| UK | 18% / 24% | £3,000 (2024) | 10%/20% for business assets (BADR) |
| Germany | 25% flat | €1,000 (Sparerpauschbetrag) | + solidarity surcharge (5.5%) → ~26.4% |
| France | 30% flat (PFU) | None | 12.8% income tax + 17.2% social contributions |
| Italy | 26% flat | None | Different rates for qualified holdings |
| Spain | 19-28% | None | Progressive (19% up to €6K; 28% above €300K) |
| Netherlands | ~32% (Box 3 notional) | €57,000 threshold | Deemed return system — not actual gains |
| Sweden | 30% flat | Limited | 30% on most capital income |
| Belgium | 0% | N/A | Generally no CGT for individual investors (exceptions for professional traders) |
Belgium stands out as having effectively no CGT for private investors — a significant attraction for investors moving within the EU. The Netherlands' Box 3 system is unusual: it taxes a deemed (notional) return on net assets above the threshold, not actual gains. This means investors pay tax on assumed returns even in loss years — currently facing legal challenges in Dutch courts.
The Net Investment Income Tax (NIIT) is a 3.8% surtax on net investment income that applies to higher-income taxpayers under the Affordable Care Act. It is applied on top of regular income tax:
Impact on capital gains:
State-level capital gains taxes are a critical variable for US investors. California taxes capital gains at ordinary income rates (up to 13.3%), making California the highest capital gains tax jurisdiction in the developed world when combined with federal and NIIT. States with no income tax (Texas, Florida, Nevada, Wyoming, Washington for most assets) make US investors dramatically more competitive.
While federal CGT rates are the same for all US residents, state capital gains taxes vary enormously:
| State | Capital Gains Tax | Notes |
|---|---|---|
| California | 0% – 13.3% | Ordinary income rates — no preferential treatment |
| New York | 4% – 10.9% | Ordinary income rates; NYC adds up to 3.876% |
| Texas | 0% | No income tax — no CGT |
| Florida | 0% | No income tax — no CGT |
| Washington | 7% (long-term only) | CGT on gains >$262,000 from 2022 |
| Nevada | 0% | No income tax |
| Massachusetts | 5% | Flat rate; short-term gains 8.5% |
| Colorado | 4.4% | Flat rate |
For high-earners with large capital gains, the choice of state of residence can save hundreds of thousands of dollars on a single large exit event (selling a business, large property gain, or concentrated stock position). Many tech executives in Silicon Valley have relocated to Nevada or Texas specifically to avoid California's 13.3% CGT on large events — though California aggressively audits individuals who claim to have changed residency but maintain California ties.
The US tax system offers several legal planning strategies for investors that are less available or structured differently in Europe:
Tax-Loss Harvesting: Selling investments at a loss to offset capital gains. In the US, capital losses can offset capital gains dollar-for-dollar. Up to $3,000 of net capital losses can also offset ordinary income annually, with excess losses carried forward indefinitely. This strategy is valuable in volatile years — European systems generally also allow loss offsets but with more restrictions.
0% CGT Bracket Harvesting: In years when taxable income is below the 15% threshold, investors can realise long-term capital gains at 0% federal rate. Selling and immediately repurchasing appreciated positions in low-income years (retirement, sabbatical, or early retirement years before Social Security) effectively resets cost basis at zero tax cost.
Qualified Opportunity Zones (QOZ): Investing capital gains into Qualified Opportunity Zone Funds provides tax deferral on the original gain and potentially complete elimination of tax on the QOZ appreciation after 10 years of holding. These are US-specific structures with no European equivalent.
Wash Sale Rule: The US disallows claiming a loss if you repurchase a 'substantially identical' security within 30 days before or after the sale. This prevents tax loss harvesting abuse and has no precise equivalent in most European systems. Notably, the wash sale rule currently does not apply to cryptocurrency — though legislation to close this has been proposed.
A question frequently asked by high-net-worth investors: can you reduce capital gains tax by relocating to a low-CGT European country (Belgium, Portugal, or another)?
The answer depends critically on citizenship:
For US citizens, the realistic strategies for reducing CGT are: relocate to a no-income-tax US state (Texas/Florida) to eliminate state CGT; optimise federal rate through holding period management and 0% bracket harvesting; use retirement accounts (Roth IRA, 401k) to shelter long-term gains; or in extreme cases, expatriate from US citizenship with proper planning.
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Work Remotely from Anywhere →For a single filer with $100,000 in taxable income (including long-term capital gains), the federal long-term CGT rate is 15%. The 0% rate applies to taxable income up to approximately $47,025 (2024), and the 15% rate applies from there up to approximately $518,900. The 3.8% NIIT does not apply at $100K of ordinary income (the threshold is $200,000 for single filers). State tax depends on the state: 0% in Texas/Florida, up to 13.3% in California.
Germany's Abgeltungsteuer (capital gains withholding tax) is a flat 25% on capital income (interest, dividends, capital gains), plus the solidarity surcharge of 5.5% on the tax itself, bringing the effective rate to approximately 26.4%. The annual Sparerpauschbetrag (saver's allowance) of €1,000 per person (€2,000 for married couples) is exempt. For a US investor in the 15% federal CGT bracket with no state income tax (e.g., in Texas), the US rate of 15% is substantially lower than Germany's 26.4%. For a California investor, the combined US rate (15% federal + 3.8% NIIT + ~9% California at that income) would reach approximately 28% — slightly higher than Germany.
No — not if you retain US citizenship. The US taxes citizens on worldwide income regardless of residence. A US citizen who moves to Belgium (which has no CGT for private investors) still owes the full US federal capital gains tax on their worldwide investment gains. The only way to permanently eliminate US capital gains tax liability through relocation is to renounce US citizenship — which triggers the exit tax (mark-to-market on all assets) and requires careful planning if net worth exceeds $2 million. Non-US citizens can legitimately reduce CGT by establishing genuine tax residency in a low-CGT country.
The wash sale rule (IRC section 1091) disallows a tax loss if you sell a security at a loss and buy a 'substantially identical' security within 30 days before or after the sale. It prevents investors from claiming tax losses while maintaining economic exposure. As of 2026, the wash sale rule does not apply to cryptocurrency — crypto is classified as property, not a security, and section 1091 only covers securities. This means crypto investors can legally sell at a loss and immediately repurchase, claiming the tax loss and resetting their cost basis. Legislation to close this has been proposed but not enacted as of early 2026.
The Net Investment Income Tax (NIIT) of 3.8% applies when MAGI exceeds $200,000 (single) or $250,000 (married filing jointly). It applies to net investment income — capital gains, dividends, interest, rental income, and passive business income. It does not apply to wages, active business income, qualified retirement plan distributions, Social Security, or alimony. For a high earner with $600,000 in wages and $100,000 in long-term capital gains, all $100,000 of gains would be subject to NIIT (as MAGI significantly exceeds the threshold), adding $3,800 to the tax bill.
The UK annual CGT exempt amount was dramatically reduced to just £3,000 for 2024/25 — down from £12,300 in 2022/23 and £6,000 in 2023/24. This represents a major tightening of UK CGT policy, bringing far more UK investors within the scope of CGT. UK CGT rates are 18% (basic rate taxpayers) and 24% (higher/additional rate taxpayers) on most assets (residential property: 18%/24%; business assets qualifying for Business Asset Disposal Relief: 10% on the first £1M lifetime gains).
Qualified Opportunity Zones (QOZs) are federally designated low-income census tracts. Investing capital gains in a Qualified Opportunity Zone Fund (QOZF) provides: (1) deferral of the original capital gain until December 31, 2026 or until the QOZ investment is sold; (2) a partial basis step-up if the investment is held long enough; and (3) complete elimination of all gains on the QOZ investment itself if held for at least 10 years. This effectively allows the new growth on a QOZ investment to be completely tax-free after a 10-year hold — a significant benefit not available in any European tax system.