Farmington Capital Gains Planning: 2026 Tax Strategy Guide for Property Owners & Investors
Tax laws are always changing, but for owners and real estate investors in Farmington, 2026 presents important opportunities and risks for capital gains planning. Correctly managing the timing and structure of real property sales can save significant Federal and Virginia state taxes. This guide reviews the current 2026 landscape, including rates, strategies, and tips for optimally navigating your capital gains liability.
Key Takeaways
- Long-term capital gains (assets held >1 year) are taxed at preferential rates: 0%, 15%, or 20% depending on income.
- Short-term gains (<1 year holding period) are taxed as ordinary income (up to 37%).
- Income thresholds may trigger an extra 3.8% Net Investment Income Tax.
- Advance planning—such as 1031 exchanges or staggered sales—can help reduce your tax bill.
- Virginia taxes all capital gains as ordinary income up to 5.75% state rate.
Current Long-Term & Short-Term Capital Gains Rates for 2026
| Filing Status | 0% | 15% | 20% |
|---|---|---|---|
| Single | Up to $47,025 | $47,026-$518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,051-$583,750 | Over $583,750 |
| Head of Household | Up to $62,950 | $62,951-$551,350 | Over $551,350 |
Short-term capital gains (held less than 1 year) are taxed as ordinary income. For high incomes, this can approach 37% plus Medicare surcharges. Farmington investors should compare their holding period before selling any asset.
How Do Net Investment Income Tax (NIIT) and Income Thresholds Affect Gains?
The 3.8% NIIT applies if your modified adjusted gross income exceeds:
| Filing Status | NIIT Threshold |
|---|---|
| Single | $200,000 |
| Married Filing Jointly | $250,000 |
| Married Filing Separately | $125,000 |
If your investment income plus salary exceeds these thresholds, the 3.8% NIIT applies to the lesser of your net investment income or total excess income. High-net-worth Farmington investors must factor this in to avoid surprises.
Timing Strategies for Reducing Capital Gains Taxes
One of the best ways to lower tax liability is through strategic timing. Options include:
- Delaying a sale until the next calendar year to split large gains across two tax periods.
- Waiting to exceed the 12-month holding period for long-term rates.
- Harvesting capital losses near year-end to offset taxable gains.
How to Use 1031 Exchanges in Farmington for 2026
A 1031 exchange lets you defer capital gains when you reinvest sale proceeds into a qualifying like-kind property. You must meet strict IRS timelines (45 days to identify intent, 180 days to close) and use a qualified intermediary. This strategy is powerful for Farmington investors upgrading or reallocating portfolios and works for rental houses, commercial buildings, and land (but not your primary residence).
| 1031 Exchange Pro | 1031 Exchange Con |
|---|---|
| Defers all federal and state capital gains taxes | Replacement property must be equal or greater value |
| Allows flexible real estate portfolio upgrades | Strict deadlines and requirements |
Self-Employed Farmington Investors: Planning for Capital Gains
Self-employed individuals face both ordinary income tax (as high as 37%) and self-employment tax (15.3%) on their active business income, but capital gains are not subject to SE tax if properly classified. It’s crucial to:
- Distinguish between investment and business property (avoid “dealer” status for long-term gains treatment).
- Use S-corp or LLC structures optimally to minimize employment taxes and qualify for best rates.
See our Self-Employment Tax Calculator for Richmond, VA to estimate your scenario.
Frequently Asked Questions
Q: Do I pay capital gains tax to Virginia on a Farmington property sale?
Yes, Virginia taxes all net capital gains at ordinary income rates up to 5.75%.
Q: What is depreciation recapture and will it affect me?
If you claimed depreciation while renting your property, a portion of your gain will be taxed at a 25% federal rate upon sale, before calculating long-term capital gains rates.
Q: Can I offset my gains with losses?
Yes, capital losses offset gains dollar-for-dollar. Up to $3,000 excess losses can offset ordinary income in 2026. Carry forward the rest.
Q: What if I inherit property?
Heirs receive a “stepped-up” basis, eliminating gains on prior appreciation for tax purposes when they later sell.
Getting Help With Your 2026 Capital Gains Planning
Proper capital gains planning can deliver thousands in tax savings each year. Contact Uncle Kam for tailored Farmington and Virginia real estate investment tax strategies. Update as of June 2024. Always check with a professional before making taxable transactions. For federal law, see the IRS Capital Gains Topic.
This information is current as of 2/16/2026. Tax laws change frequently. Verify updates with the IRS (IRS.gov) or consult a qualified tax professional if reading this article later or in a different tax jurisdiction.
