Capital Gains Tax Calculator
15% (Standard Short-Term/Long-Term)
20% (Higher Long-Term)
7% (Lower Long-Term)
3.8% (Net Investment Income Tax – NIIT)
37% (Maximum Short-Term – for highest income brackets)
Your Estimated Capital Gains Tax: $0.00
Understanding Capital Gains Tax
Capital Gains Tax is a tax levied on the profit made from selling an asset that has increased in value. This asset could be anything from stocks and bonds to real estate and collectibles. The profit is known as the "capital gain."
How Capital Gains are Calculated
The basic formula for calculating capital gain is:
Capital Gain = Sale Price – (Purchase Price + Transaction Costs)
Where "Transaction Costs" include expenses like brokerage fees, commissions, legal fees, and sometimes costs for improvements (especially for real estate).
Short-Term vs. Long-Term Capital Gains
The tax rate applied to your capital gain depends on how long you owned the asset:
- Short-Term Capital Gains: If you owned the asset for one year or less, the gain is typically taxed at your ordinary income tax rate, which can be significantly higher than long-term rates.
- Long-Term Capital Gains: If you owned the asset for more than one year, the gain is subject to preferential tax rates, which are generally lower than ordinary income tax rates. These rates vary based on your taxable income.
The Role of this Calculator
This calculator helps you estimate your potential capital gains tax liability. You input the purchase price, sale price, dates of purchase and sale, applicable tax rate (you may need to consult tax professional for your specific rate), and any transaction costs. The calculator then determines your capital gain and estimates the tax owed based on the provided rate.
Important Considerations:
- Tax Basis: The purchase price is the initial basis. For real estate, certain improvements can increase your basis, thus reducing your capital gain.
- Depreciable Assets: For certain assets (like investment properties), depreciation taken over time reduces your basis and can be subject to "depreciation recapture" tax at ordinary income rates.
- Net Investment Income Tax (NIIT): An additional 3.8% tax may apply to net investment income (including capital gains) for individuals, estates, and trusts with income above certain thresholds.
- Wash Sale Rule: If you sell a security at a loss and buy a substantially identical one within 30 days before or after the sale, you cannot deduct the loss.
- Capital Losses: Capital losses can be used to offset capital gains. If losses exceed gains, you can deduct up to $3,000 of net capital loss against ordinary income per year, and carry forward any excess loss to future years.
Disclaimer: This calculator is for informational purposes only and does not constitute financial or tax advice. Tax laws are complex and subject to change. Consult with a qualified tax professional or financial advisor for personalized advice regarding your specific situation.