Collectibles and the 28% Tax Rate: Why Coins, Cards, and Art Are Not Taxed Like Stocks

by | Jun 17, 2026 | Collectibles Tax Notes

The short version

In February 2026, a 1998 Pikachu Illustrator card graded a perfect 10 sold at auction for 16.49 million dollars, the most expensive trading card ever sold. The seller owed federal tax on the gain, at a rate most people do not expect.

If you sell a coin, a trading card, a painting, a rare watch, or a bottle of fine whiskey at a profit, you may assume you owe the same low long-term capital gains tax you would pay on a stock: 0, 15, or 20 percent. For most “collectibles,” that is wrong. Federal law taxes long-term gain on collectibles at a maximum rate of 28 percent. A separate 3.8 percent surtax can apply on top, pushing the real ceiling to about 31.8 percent. And if you owned the item one year or less, the gain is ordinary income at your regular bracket, which reaches 37 percent in 2026. Here is where the 28 percent rate comes from, what counts as a collectible, and how to estimate the bill before you sell.

(“Long-term” means you held the item more than one year. “Basis” means your cost in the item, generally what you paid plus certain costs. Both matter below.)

What the law actually says (primary authority first)

Three pieces of the Internal Revenue Code do the work.

The rate. Internal Revenue Code Section 1(h) sets the top tax rates on long-term capital gain. For most assets, Section 1(h)(1)(D) caps the rate at 20 percent. But Section 1(h)(4) carves out a separate bucket it calls “28-percent rate gain,” and Section 1(h)(5) defines the main part of that bucket as “collectibles gain,” meaning gain “from the sale or exchange of a collectible.” The effect is a higher ceiling: long-term gain on a collectible is taxed at a maximum federal rate of 28 percent rather than 20 percent. The IRS says the same thing in plain language in its Topic No. 409: “Net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate,” and IRS Publication 550 confirms it in its capital gains rate table.

What counts as a collectible. Section 1(h)(5) borrows its definition from Code Section 408(m), which lists “(A) any work of art, (B) any rug or antique, (C) any metal or gem, (D) any stamp or coin, (E) any alcoholic beverage, or (F) any other tangible personal property specified by the Secretary.” That sweeps in fine art, antiques, gold and silver, gems, stamps, coins, and wine and whiskey by name. The catch-all in (F) is why trading cards, sports memorabilia, and similar tangible items are generally treated as collectibles too. Whether a specific item such as a luxury watch or a classic car falls inside the definition is its own question, and a later article in this series takes it up.

The surtax. Code Section 1411 adds a 3.8 percent net investment income tax on the lesser of your net investment income or the amount your modified adjusted gross income exceeds a threshold: 250,000 dollars on a joint return, 125,000 for married filing separately, and 200,000 for everyone else. Gain from selling a collectible is net gain from the disposition of property, so it counts as net investment income. For a higher-income seller, the 3.8 percent stacks on top of the 28 percent.

How it works in practice

You report a collectible sale the same way you report a stock sale: on Form 8949, with the totals carried to Schedule D. The difference is in the Schedule D instructions, which include a “28% Rate Gain Worksheet.” That worksheet gathers your collectibles gain and runs it through the 28 percent calculation on Schedule D line 18. You do not elect the higher rate; the form applies it.

A worked example. Say you bought a graded card for 10,000 dollars and sold it three years later for 60,000, a 50,000 long-term gain.

  • If this were a stock and you sit in the 15 percent bracket, you would expect to pay 7,500.
  • Because it is a collectible, the maximum rate is 28 percent: 14,000. That is 6,500 more on the exact same profit.
  • If your income is above the Section 1411 threshold, add the 3.8 percent surtax, another 1,900, for 15,900 total. That is an effective 31.8 percent.

Hold the same card one year or less and the gain is short-term, taxed as ordinary income at your regular bracket, up to 37 percent in 2026 (and up to 40.8 percent once the surtax applies). The 28 percent ceiling is a long-term benefit; it does nothing for a quick flip.

One limit worth stating plainly: 28 percent is a maximum, not a flat tax. If your other income is low enough that your regular bracket sits below 28 percent, your collectibles gain is taxed at that lower regular rate instead. The 28 percent ceiling bites mainly when your income is already substantial.

The numbers

Every rate below is current for 2026. For the ordinary-income row, the 37 percent top ordinary rate is taken from the current IRS 2026 federal income-tax brackets.

For quick reference:

  • Most long-term capital gain, such as stock gain: top federal rate 20 percent, or 23.8 percent with the 3.8 percent surtax. Source: IRC 1(h)(1)(D) and IRS Publication 550.
  • Long-term gain on a collectible: top federal rate 28 percent, or 31.8 percent with the 3.8 percent surtax. Source: IRC 1(h)(1)(F), (4), and (5), IRS Topic No. 409, and IRS Publication 550.
  • A collectible held one year or less: ordinary-income treatment, up to 37 percent in 2026, or up to 40.8 percent with the 3.8 percent surtax. Source: IRC 1(j) and the IRS 2026 federal income-tax brackets.

What this means for you

  • Run the real number before you sell. The gap between the 15 to 20 percent you may assume and the 28 percent that actually applies is wide, and it is the same sale either way.
  • The one-year line decides a lot. More than one year gets the 28 percent ceiling. One year or less is ordinary income with no ceiling.
  • Basis is everything. Your tax is on the gain, which is sale price minus your basis, so a clean record of what you paid, plus grading, restoration, and selling costs, directly lowers the bill. Thin records are the most common and most expensive mistake collectors make.
  • Higher earners feel it twice. Above the Section 1411 thresholds, the 3.8 percent surtax stacks on the 28 percent.

This is the general rule. Your specific facts change the result: how long you held the item, whether the IRS would treat you as a hobbyist, an investor, or a dealer, and how much other income you have. That classification question is the subject of the next cluster in this series, and it can move your rate in either direction.

Related reading

  • What the IRS counts as a collectible, and when a quick flip becomes ordinary income (Collectibles Tax Notes, forthcoming).
  • Cost basis for collectibles: solving the receipt and provenance problem before you sell (Collectibles Tax Notes, forthcoming).
  • Pokemon and trading-card taxes: from sealed boxes to a record-setting Pikachu (Collectibles Tax Notes, forthcoming).

The primary law cited above is linked inline: IRC Section 1(h), IRC Section 408(m), IRC Section 1411, IRS Topic No. 409, and IRS Publication 550.

How Sheepdog Tax can help

I am Noah Green, a CPA and Certified Fraud Examiner, and Sheepdog Tax is a veteran-owned practice. I help collectors and resellers get the tax treatment of a sale right before they file. If you are planning to sell, or have already sold, a card, coin, watch, art piece, or other collectible, I can review the holding period, basis, and classification and estimate the actual tax so there are no surprises at filing. To request a collectibles gain review before you sell or file, reach me at noah@sheepdogtax.com.

Sources (primary authority first, then secondary)

  1. Internal Revenue Code Section 1(h)(1)(D), (1)(F), (4), and (5) (maximum capital gains rates; 28-percent rate on net capital gain that is 28-percent rate gain; “28-percent rate gain”; “collectibles gain”). https://www.law.cornell.edu/uscode/text/26/1
  2. Internal Revenue Code Section 408(m) (definition of “collectible”). https://www.law.cornell.edu/uscode/text/26/408
  3. Internal Revenue Code Section 1411 (net investment income tax of 3.8 percent; thresholds). https://www.law.cornell.edu/uscode/text/26/1411
  4. IRS, Instructions for Schedule D (Form 1040), including the 28% Rate Gain Worksheet and line 18. https://www.irs.gov/instructions/i1040sd
  5. IRS, Publication 550, Investment Income and Expenses (capital gain tax rates; collectibles gain at a 28 percent maximum). https://www.irs.gov/publications/p550
  6. IRS, Topic No. 409, Capital Gains and Losses (collectibles taxed at a maximum 28 percent; 0, 15, and 20 percent thresholds). https://www.irs.gov/taxtopics/tc409
  7. IRS, About Form 8949, Sales and Other Dispositions of Capital Assets (reporting; totals carry to Schedule D). https://www.irs.gov/forms-pubs/about-form-8949
  8. IRS, Federal income tax rates and brackets (2026 ordinary brackets; 37 percent top rate). https://www.irs.gov/filing/federal-income-tax-rates-and-brackets
  9. CNBC, “Logan Paul sold a Pokemon card for more than $16 million. Here’s why investors are watching” (the record 16.49 million dollar 1998 Pikachu Illustrator sale, Goldin auction, closed February 16, 2026). https://www.cnbc.com/2026/03/29/pokemon-card-values-rise-logan-paul-pikachu-auction.html

Prepared by Noah Green, CPA, CFE.