2026 Tax Return: Should You Choose the Progressive Tax Scale Over the Flat Tax?

Dividends, interest, and capital gains from securities received in 2025 are subject to the flat-rate withholding tax by default. With just one click—checking box 2OP—you can switch to the progressive tax scale. Here are the few situations in which this choice may prove advantageous.
 

The 2026 tax return is an opportunity to reassess your tax strategies regarding investment income. Dividends and interest received in 2025 were automatically subject, at the time of receipt, to the 30% flat-rate withholding tax (PFU) (12.8% for income tax and 17.2% for social security contributions). In practice, taxpayers simply need to verify the accuracy of the pre-filled amounts provided in the single tax form (IFU) submitted by each financial institution. But behind this apparent simplicity, the option to choose the progressive tax scale remains available and, in some cases, warrants careful consideration.
 

The flat-rate tax option: a choice that rarely pays off, except in special cases
To opt out of the flat-rate tax and choose the progressive tax scale, simply check box 2OP on the tax return. This choice is comprehensive and irrevocable for the year in question. It applies to all income subject to the flat tax rate (PFU): dividends, interest, and capital gains from the sale of securities. The decision comes down to the difference between the household’s marginal tax rate (TMI) and the flat rate of 12.8%, taking into account the 40% deduction on dividends and the partial deductibility of the CSG (6.8%), two benefits exclusive to the progressive tax scale.
 

In practice, this option is rarely advantageous. For taxpayers whose marginal tax rate does not exceed 11%, it may prove beneficial, particularly if investment income is modest and the household’s other income is low. Beyond that threshold, the balance almost always tips in favor of the flat tax rate (PFU). A few specific cases are exceptions to this rule. An executive who has sold shares in their company and qualifies for the 85% deduction when calculating taxable capital gains may benefit from this option. A taxpayer with a real estate loss that can be offset against total income, or with tax credits that would be forfeited if their investment income remained subject to the PFU, may also benefit from this option. This is particularly true for holders of tax-advantaged real estate investment trusts (SCPIs) or tax-exemption schemes that have reached the end of their cycle.
 

Capital Gains on Securities in 2025: Be Aware of the Retroactive Effect of the Increase in Social Security Contributions
If you sold stocks, bonds, or mutual fund shares in 2025, you must calculate the amount of your taxable capital gain yourself by offsetting all capital gains and losses realized during the year. If the result is positive, you can deduct losses incurred during the previous ten years, provided you reported them at the time—they are not pre-filled, so you’ll need to refer to your previous tax return to find them.
 

One key difference sets 2025 apart from previous years. Unlike dividends and interest—which have already been subject to the flat tax rate (PFU) as they were earned—your capital gains on securities have not yet been taxed. The corresponding tax will be collected next September, along with the balance of your income tax. And this is where a major change comes into play: the 2026 Social Security Financing Act raised the CSG on certain capital income from 9.2% to 10.6%, increasing total social security contributions from 17.2% to 18.6% and the flat tax rate (PFU) from 30% to 31.4%. This increase applies retroactively to capital gains on securities realized as early as 2025. A sale of shares made in February 2025 will therefore be taxed at 31.4%, not 30% as one might have thought.
 

This retroactive measure—which has been legally challenged but is now in effect—changes after-tax return calculations and may influence decisions to sell. It does not apply to life insurance policies or to PEA accounts for gains realized before January 1, 2026—account holders manage this phased transition. For investors hesitant to rebalance their portfolios, it’s worth noting that any transfer between investment vehicles now results in higher taxes, and the use of tax-deferred accounts (life insurance, PEA) automatically becomes more advantageous. This should be discussed with your financial advisor as part of an overall optimization strategy, particularly for large portfolios held in standard securities accounts.