How to Calculate Capital Gains Tax
Capital gains tax is owed when you sell an asset (stocks, real estate, collectibles) for more than you paid for it. The tax rate depends on how long you held the asset and your income level. Understanding how to calculate it helps you plan your sales strategically.
Short-Term vs. Long-Term Capital Gains
- Short-term: Asset held โค 1 year. Taxed as ordinary income (10%โ37% depending on your bracket).
- Long-term: Asset held > 1 year. Taxed at preferential rates: 0%, 15%, or 20%.
The Basic Formula
Capital Gain = Sale Price โ Cost Basis
Tax Owed = Capital Gain ร Applicable Tax Rate
Cost basis includes the purchase price plus any commissions, fees, or improvements.
Step-by-Step Example
You bought 100 shares of stock at $50/share and sold them 2 years later at $80/share.
- Cost basis: 100 ร $50 = $5,000
- Sale proceeds: 100 ร $80 = $8,000
- Capital gain: $8,000 โ $5,000 = $3,000
- As a single filer with $60,000 income, your long-term rate is 15%
- Tax owed: $3,000 ร 0.15 = $450
2024 Long-Term Capital Gains Tax Rates
| Filing Status | 0% Rate | 15% Rate | 20% Rate |
|---|---|---|---|
| Single | Up to $47,025 | $47,026โ$518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,051โ$583,750 | Over $583,750 |
Net Investment Income Tax (NIIT)
High earners may owe an additional 3.8% NIIT on investment income if their modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly).
Tax-Loss Harvesting
You can offset capital gains by realizing capital losses in the same tax year. If you have $3,000 in gains and $1,200 in losses, you only pay tax on the net $1,800.
Use our capital gains tax calculator to estimate what you'll owe.