PE Professional Annual Tax Estimator (2026)

Private equity professionals face the most complex individual tax picture of any profession: ordinary income from management fees, long-term capital gains from qualifying carry, § 1061 recharacterization that converts some carry from LTCG to ordinary income, NIIT on investment income, and state taxes that vary by as much as 13 percentage points based on residency. This tool models your 2026 federal and state tax bill across all income streams.

What this estimates. Federal ordinary income tax, federal LTCG tax, net investment income tax (NIIT), and state income tax. It does not model Social Security/Medicare taxes — use the ManCo S-Corp calculator for SE tax savings. This is a directional planning estimate; actual tax depends on deductions, credits, AMT, and state-specific rules not fully captured here.

Filing profile

Filing status

Deductions

State of residence

Ordinary income

ManCo W-2 wages / employer salary ($) W-2 income from your ManCo S-Corp or employer. Supports 401(k) / cash balance plan contributions. Not subject to NIIT.

Management fees / other ordinary income ($) Management fee income not routed through a W-2 ManCo. Includes deferred comp distributions, phantom carry, and other non-carry ordinary income. Not subject to NIIT (active business income).

Carry — ordinary income (§ 1061 recharacterized, held <3 yrs) ($) Carry that fails the § 1061 three-year holding test, recharacterized from LTCG to ordinary income. The § 1061 clock starts at profits interest grant date — not fund close. Still subject to NIIT (remains partnership investment income). Combined federal rate: 37% + 3.8% = 40.8%.

Ordinary investment income ($) Interest income, ordinary dividends, short-term capital gains from taxable brokerage. Subject to ordinary income tax and NIIT.

Long-term capital gains

Carry — LTCG (§ 1061 satisfied, held 3+ yrs) ($) Carry where the § 1061 three-year holding period is satisfied. Taxed at LTCG rates (20% for high earners) plus NIIT (3.8%) = 23.8% combined federal rate. CA and NY apply an additional 13.3% / 10.9% on top.

Co-investment / other LTCG ($) Capital gains from co-investments in capital interests (§ 1061 does NOT apply — only 1-year hold required), long-term public stock gains, real estate, or other LTCG. Subject to LTCG rates + NIIT.

QSBS excluded gain (reference)

QSBS excluded gain — not taxable ($) Gain excluded under IRC § 1202. Not subject to federal income tax or NIIT (excluded gain is not included in MAGI for NIIT purposes). OBBBA 2026: up to $15M excluded per issuer for stock held 5+ years (100%), 4 years (75%), 3 years (50%). Entered for reference only — does not affect this tax calculation.

How PE income streams are taxed in 2026

Carried interest — the two-rate structure

Under IRC § 1061 (TCJA 2017), carried interest is subject to a mandatory three-year holding period test:

LTCG (23.8% federal): Carry held for more than three years from the grant date of the profits interest qualifies as long-term capital gain — taxed at 20% plus 3.8% NIIT for high earners. The § 1061 clock starts at grant, not at fund close or at vesting.
Ordinary income (40.8% federal): Carry that fails the three-year test is recharacterized to short-term capital gain and taxed at ordinary income rates up to 37%. NIIT (3.8%) still applies because the income remains partnership investment income — the § 1061 recharacterization changes the rate character but not the NIIT character. Combined: 37% + 3.8% = 40.8%.

This is why fund vintage matters so much for tax planning. A partner at a 2024 vintage fund receiving a 2026 distribution will pay 40.8%, while the same dollar amount from a 2022 or earlier vintage pays 23.8%.

Co-investment — § 1061 does not apply

Co-investments made in exchange for a capital interest (not a profits interest) are not covered by § 1061. A one-year hold qualifies for LTCG rates (20% + 3.8% NIIT). This is one of the most significant tax advantages in PE structures — dollar-for-dollar, capital interest co-invest gains are taxed at roughly 17 percentage points less than a carry distribution from a short-vintage fund.

NIIT on PE income

The 3.8% net investment income tax (IRC § 1411) applies to the lesser of net investment income or the excess of MAGI above $200,000 (single) / $250,000 (MFJ). These thresholds are not indexed for inflation. NII includes:

LTCG carry (investment income from passive partnership)
Ordinary carry recharacterized by § 1061 (still partnership investment income; the recharacterization changes ordinary vs. capital gain treatment but not NII classification for most PE partners)
Co-investment gains and ordinary portfolio income
Not ManCo W-2 wages or management fees (active trade or business income)
Not QSBS excluded gain (excluded from MAGI)

2026 tax values used in this calculator

Federal brackets: 10%–37%; 37% rate above $640,600 (single) / $768,700 (MFJ) — IRS Rev. Proc. 2025-32 / Tax Foundation
LTCG thresholds: 0% up to $49,450 / $98,900; 20% above $545,500 / $613,700 — IRS Rev. Proc. 2025-32 / Kiplinger
NIIT: 3.8% on NII above $200,000 (single) / $250,000 (MFJ) — IRC § 1411; IRS Topic 559
Standard deduction: $16,100 single / $32,200 MFJ — IRS Rev. Proc. 2025-32
California brackets: 1%–12.3% graduated + 1% Mental Health Services surtax on income above $1,000,000 — CA FTB 2025 Schedule X/Y (2026 schedule pending FTB publication, typically Oct–Nov)
New York brackets: 4%–10.9% graduated — NY Tax Dept 2025 IT-201 (2026 schedule pending publication)

Related tools and guides

Get your actual numbers modeled

This estimate gives you a starting point. A PE specialist advisor runs your actual scenario — fund vintages, § 1061 fund-by-fund analysis, NIIT grouping elections, state sourcing, IRMAA impact — and identifies planning moves available before year-end. Free match.