Selling your business: what tax do you actually pay?

The short answer

Most of what an owner nets from a sale depends on three things: what is sold (company stock or company assets), how the price is allocated between capital gain and ordinary income, and when the money arrives. For 2026, the top federal long-term capital gains rate is 20 percent, the 3.8 percent net investment income tax can apply on top, and North Carolina taxes the gain at 3.99 percent.

The 2027 federal brackets are not published. North Carolina's Session Law 2026-41 sets the individual rate at 3.49 percent for 2027, 2028, and 2029, and it keeps a revenue trigger that can push the rate lower if General Fund collections clear a set amount.

What federal rates matter at a 2026 sale?

The capital gains thresholds are the maximum 15 percent rate amounts in Rev. Proc. 2025-32, so the 20 percent rate starts above them. IR-2025-103 states that the top rate remains 37 percent above $640,600 of income for a single taxpayer and $768,700 for a married couple filing jointly. The 3.8 percent thresholds are on the IRS net investment income tax page and are not adjusted for inflation. The 25 percent maximum on unrecaptured Section 1250 gain is the rate in Topic 409. None of these 2027 brackets have been released.

What gets taxed, and how?

Gain is price minus basis. Basis is what you paid for the stock or the assets, adjusted over time. Character decides the rate.

Gain on stock held more than a year, and gain allocated to goodwill in an asset sale, is generally long-term capital gain. In an asset sale, part of the price can be ordinary income instead: depreciation recapture on equipment under Section 1245, inventory and receivables, and payments for a non-compete or a consulting agreement. Buyer and seller report the allocation on Form 8594. The comparison is in asset sale vs stock sale.

The 3.8 percent tax generally applies to capital gains, but gain from selling an interest in a pass-through business you materially participated in can be partly or fully outside it. That split is not something to assume from the headline price.

Entity type matters. In an asset sale by a C corporation, the company pays tax at the 21 percent corporate rate in Section 11, and the shareholders pay again when the cash is distributed. An S corporation or partnership generally passes the gain through, with the character set by the assets.

Installment terms can spread gain over the years the payments arrive. See how an installment sale is taxed.

What does North Carolina add?

North Carolina taxes capital gains as ordinary income. The Department of Revenue rate schedules state that the rate for taxable years after 2025 is 3.99 percent, and they note that additional changes may apply beginning in 2027 under rate-reduction triggers.

Session Law 2026-41, the enacted text of Senate Bill 257, replaces that single "after 2025" line. The individual rate is 3.99 percent in 2026 and 3.49 percent in 2027, 2028, and 2029, then 3.24 percent in 2030 through 2032 and 2.99 percent after 2032. Subsection (a1) still says that if General Fund revenue beats the trigger for a fiscal year, the rate for the indicated years drops further, by 0.25 percentage point, but not below the floor in the statute. A closing date chosen only for the 3.49 percent line can still land in a lower triggered rate, or in a year when the trigger does not fire. Your CPA reads the trigger against the revenue reports. This page does not.

What does a $10,000,000 gain look like?

Hypothetical, for illustration only. Elena and Mark, a North Carolina couple, sell company stock and have a $10,000,000 long-term gain. Assume the entire gain is in the top federal bracket and is subject to the 3.8 percent tax. This is a top-rate sketch, not a tax return. It ignores basis details, ordinary income from the deal, the standard or itemized deductions, and the lower brackets the first dollars of gain actually cross.

The state-rate change alone is $50,000 on this hypothetical gain: $399,000 minus $349,000. Timing a closing involves the buyer's terms, financing, and the business itself. The $50,000 is not a reason by itself to wait or to rush.

Which levers get discussed before a letter of intent?

Stock sale versus asset sale, and if the deal is an asset sale, the purchase price allocation on Form 8594.

Installment payments, which move gain into the year cash arrives, with the exceptions in the installment sale page.

Qualified small business stock under Section 1202. The site's page on who qualifies for QSBS walks through the rule already published there: for C corporation stock issued after July 4, 2025, the exclusion can cover up to the greater of $15,000,000 or 10 times basis, at 50 percent after three years, 75 percent after four, and 100 percent after five, if every statutory test is met. That page cites Public Law 119-21 and the text of Section 1202. It is not a conclusion that your shares qualify.

Rollover equity and earnouts, which change when part of the price is taxed.

Retirement contributions in a year that has ordinary income, including a cash balance plan. Whether a plan fits depends on employees, cash flow, and funding rules.

You can put a price, debt, and basis into the business sale calculator. It is an illustration under 2026 rates, not a closing statement. The structure comparison is what the seller keeps in an asset sale versus a stock sale. Durham owners can start from the financial advisor in Durham, NC page.

The bottom line

On a 2026 sale, the federal rates owners ask about are 20 percent above $613,700 joint or $545,500 single, 37 percent above $768,700 joint or $640,600 single, and 3.8 percent above $250,000 or $200,000 of the relevant income measure. North Carolina adds 3.99 percent in 2026. The 3.49 percent line for 2027 through 2029 is in Session Law 2026-41, with a trigger that can go lower. The structure of the deal moves more dollars than the rate table does.

If a buyer named a price this week, do you know how much of it is capital gain, how much is ordinary income, and which tax year each dollar lands in?

Start with the owner lessons or the free Exit Readiness Scorecard if the sale is still a few years out.

Questions people ask next

Is the sale of a business taxed as capital gains?

Partly, in most deals. A stock sale is usually mostly long-term capital gain if the shares were held more than a year. An asset sale splits the price. Goodwill is generally capital gain. Depreciation recapture, inventory, and payments for a non-compete or consulting agreement are generally ordinary income.

When do I pay the tax?

Generally with the return for the year of the sale, unless payments are deferred under the installment method. Estimated tax payments can be due during the year. See how an installment sale reports gain as cash arrives.

Does North Carolina have a special capital gains rate?

No. North Carolina taxes the gain as ordinary income at a flat rate. The Department of Revenue rate page states 3.99 percent for taxable years after 2025. Session Law 2026-41 then sets 3.49 percent for 2027, 2028, and 2029, subject to a revenue trigger.

What is the 3.8 percent tax?

The net investment income tax. It is 3.8 percent of the smaller of net investment income or the amount by which modified adjusted gross income exceeds $250,000 for joint filers and $200,000 for single filers. Those thresholds are not indexed. Gain from a business you materially participate in can fall partly or fully outside it, which is a facts question.