Capital Gains Tax Calculator

Capital gains tax applies when you sell investments, real estate, or other assets for more than you paid. Understanding how capital gains are calculated and taxed is essential for investors seeking to maximize after-tax returns. The tax treatment differs dramatically based on how long you held the asset, your income level, and the type of asset sold. Whether you're trading stocks, selling investment property, or planning retirement distributions, mastering capital gains tax helps you time sales strategically, minimize tax obligations, and keep more of your investment profits.

Net Investment Income Tax (NIIT)

The Net Investment Income Tax adds 3.8% to investment income including capital gains for high earners, significantly increasing the effective tax rate.

NIIT applies to the lesser of net investment income or the amount by which modified adjusted gross income (MAGI) exceeds $200,000 (single), $250,000 (married filing jointly), or $125,000 (married filing separately). Investment income includes interest, dividends, capital gains, rental income, and passive business income, but excludes wages, self-employment income, and distributions from qualified retirement plans.

Calculate NIIT on the overlap between your net investment income and the amount your MAGI exceeds the threshold. A single filer with $240,000 MAGI including $60,000 in capital gains pays NIIT on $40,000 (the amount exceeding $200,000), resulting in $1,520 in additional tax ($40,000 × 0.038).

If your MAGI is $220,000 (single) with $10,000 in capital gains, you pay NIIT only on the $10,000 of investment income (not the full $20,000 excess over threshold), costing $380. The NIIT applies to the lesser of investment income or excess MAGI.

For high earners, NIIT effectively raises the long-term capital gains rate from 15% to 18.8% or from 20% to 23.8%. Combined with state taxes, this creates substantial tax burdens on investment income. California residents face federal rates of 23.8% plus 13.3% state tax, totaling 37.1% on long-term capital gains.

Strategies to minimize NIIT include managing income to stay below thresholds (perhaps spreading asset sales across multiple years), maximizing deductions to reduce MAGI, and using tax-advantaged accounts like IRAs and 401(k)s where gains aren't subject to NIIT.

Short-Term vs. Long-Term Capital Gains

The holding period fundamentally determines how your capital gains are taxed. Short-term and long-term gains receive dramatically different tax treatment.

Short-term capital gains apply to assets held one year or less. These gains are taxed as ordinary income at your regular income tax rates, which range from 10% to 37% depending on your tax bracket. If you're in the 24% tax bracket and sell stock for a $10,000 gain after holding it for eight months, you pay $2,400 in federal tax on that gain ($10,000 × 0.24).

Long-term capital gains apply to assets held more than one year. These receive preferential tax rates of 0%, 15%, or 20% depending on your taxable income. For 2024, single filers pay 0% on long-term gains if taxable income is below $47,025, 15% on income from $47,025 to $518,900, and 20% above $518,900. A $10,000 long-term gain taxed at 15% costs only $1,500, saving $900 compared to the 24% short-term rate.

The holding period clock starts the day after purchase and includes the sale date. Stock purchased on March 15, 2023 must be held until at least March 16, 2024 to qualify for long-term rates. Selling on March 15, 2024 (exactly one year) is short-term. Even one day makes the difference between ordinary income rates and preferential capital gains rates.

This timing creates powerful tax planning opportunities. If you've held an investment 11 months with substantial gains, waiting one more month to sell can save thousands in taxes. A $50,000 gain on stock held 11 months costs $12,000 at the 24% ordinary rate, but waiting one month reduces the tax to $7,500 at the 15% long-term rate, saving $4,500.

Calculate gains as sale proceeds minus cost basis. If you bought 100 shares at $50 ($5,000 total) and sell them for $85 ($8,500 total), your gain is $3,500 ($8,500 - $5,000). Brokers report cost basis on Form 1099-B, but you're responsible for accuracy, especially for older holdings or gifts where basis might not be reported correctly.

Special Capital Gains Situations

Certain assets and situations have special capital gains rules that affect tax calculations.

Primary residence exclusion allows excluding up to $250,000 of gains ($500,000 married filing jointly) from the sale of your primary residence if you owned and lived in the home for at least two of the five years before sale. A couple buying a home for $300,000 and selling for $750,000 excludes the entire $450,000 gain from taxation. This exclusion can be used repeatedly every two years.

Collectibles including art, antiques, coins, and precious metals face a maximum 28% federal capital gains rate regardless of holding period. Even long-term gains on collectibles don't qualify for 0%, 15%, or 20% rates. This higher rate makes collectibles less tax-efficient than stocks or bonds.

Small business stock (Qualified Small Business Stock or QSBS under Section 1202) can provide up to 100% exclusion of gains if you held stock for more than five years, subject to various requirements. This powerful provision can save millions for early employees and investors in qualifying startups.

Real estate depreciation recapture requires paying 25% federal tax on the portion of real estate gains attributable to depreciation deductions claimed during ownership. If you bought rental property for $300,000, claimed $40,000 in depreciation, and sold for $400,000, the $40,000 depreciation recapture is taxed at 25% while the remaining $60,000 of gain qualifies for capital gains rates.

Installment sales allow spreading capital gains over multiple years by receiving payments over time. Selling property for $500,000 gain over five years means recognizing $100,000 in gain annually, potentially keeping you in lower tax brackets each year versus recognizing the full gain immediately.

Like-kind exchanges (1031 exchanges) for real estate allow deferring gains by rolling proceeds into similar property. Sell a $600,000 rental property and purchase an $800,000 replacement property, and you defer the gain until eventually selling without exchanging.

Understanding capital gains taxation—including holding period requirements, rate brackets, NIIT, state taxes, and harvesting strategies—empowers investors to time asset sales strategically, minimize tax obligations, and maximize after-tax investment returns through informed planning throughout the year.

Long-Term Capital Gains Tax Rates and Brackets

Long-term capital gains rates create a separate bracket system overlaying regular income tax brackets, requiring careful calculation to determine your effective rate.

For 2024, the thresholds are: 0% rate for single filers with taxable income up to $47,025, married filing jointly up to $94,050, and head of household up to $63,000. The 15% rate applies to single filers from $47,025 to $518,900, married filing jointly from $94,050 to $583,750, and head of household from $63,000 to $551,350. The 20% rate applies above these thresholds.

Your capital gains rate depends on total taxable income including the capital gains themselves. A single filer with $40,000 in ordinary income and $15,000 in long-term capital gains has $55,000 total taxable income. The first $7,025 of gains ($47,025 - $40,000) is taxed at 0%, while the remaining $7,975 is taxed at 15%, resulting in $1,196 in capital gains tax ($0 + ($7,975 × 0.15)).

This stacking means capital gains "sit on top" of ordinary income when determining rates. If your ordinary income is $45,000 and you have $10,000 in capital gains, that $10,000 pushes you from the 0% capital gains bracket partially into the 15% bracket. Strategic planning can keep income low enough to maximize the 0% bracket.

The 0% long-term capital gains rate provides powerful planning opportunities for retirees and others with modest ordinary income. A retired couple with $50,000 in Social Security and pension income plus $40,000 in long-term capital gains might pay zero capital gains tax if taxable income (after standard deduction) falls within the 0% threshold.

High earners face the 20% top rate plus the 3.8% Net Investment Income Tax (NIIT), creating an effective 23.8% federal rate. Add state capital gains taxes (which vary widely), and top-bracket taxpayers in high-tax states can face combined rates exceeding 30-35% on long-term gains.

State Capital Gains Taxes

State treatment of capital gains varies dramatically, from no state tax to rates exceeding 13%, significantly affecting after-tax returns.

Nine states have no income tax and therefore no capital gains tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Selling investments while residing in these states avoids state capital gains tax entirely, though establishing residency purely for tax purposes can invite IRS scrutiny.

Most states tax capital gains as ordinary income at standard income tax rates. If your state has a 5% income tax rate, capital gains are taxed at 5% regardless of holding period. Federal preferential treatment doesn't extend to state taxes in these jurisdictions.

A few states provide preferential rates for long-term capital gains. Arizona allows excluding 25% of long-term gains, effectively reducing the tax rate. New Mexico provides deductions for capital gains income. These states recognize the federal distinction between short and long-term gains in their tax codes.

California, New York, New Jersey, Oregon, and Minnesota have the highest state capital gains tax rates, all exceeding 9%. California tops out at 13.3% for high earners. Combined with federal taxes and NIIT, California residents in the top bracket pay approximately 37.1% on long-term capital gains.

Calculate total tax burden by adding federal and state rates. A long-term gain taxed at 15% federal plus 5% state creates a 20% combined rate. With NIIT added, top-bracket earners in high-tax states face combined rates approaching 35-40%.

Some investors consider state residency in tax planning. Moving from California to Nevada before realizing large capital gains saves 13.3% on those gains. However, states aggressively challenge residency changes timed around large transactions, requiring careful documentation and genuine relocation.

Tax-Loss Harvesting Strategies

Tax-loss harvesting uses investment losses to offset gains, reducing overall tax liability. This powerful strategy requires careful planning and adherence to IRS rules.

Capital losses offset capital gains dollar-for-dollar. If you have $30,000 in long-term gains and $12,000 in long-term losses, you only pay tax on $18,000 net gain. Short-term losses offset short-term gains first, then long-term gains, while long-term losses offset long-term gains first, then short-term gains.

Losses exceeding gains can offset up to $3,000 of ordinary income annually. If you have $8,000 in losses and $2,000 in gains, the $6,000 net loss offsets $3,000 of ordinary income this year, with the remaining $3,000 carrying forward to next year. This $3,000 limit applies regardless of filing status.

Excess losses carry forward indefinitely until used. A $50,000 loss with no offsetting gains creates $3,000 ordinary income deductions annually for 16+ years until exhausted (plus offsetting future gains). Track carryforward losses carefully, as they're valuable tax assets.

The wash sale rule prevents selling securities at a loss and immediately repurchasing them. If you sell stock at a loss and buy substantially identical stock within 30 days before or after the sale (61-day window), the loss is disallowed. The disallowed loss adds to the basis of the repurchased stock, deferring the loss.

Implement tax-loss harvesting by reviewing portfolios before year-end to identify positions with unrealized losses. Sell losers to harvest losses while maintaining market exposure by purchasing similar (but not substantially identical) securities. You might sell a technology ETF at a loss and immediately buy a different technology ETF, maintaining sector exposure while harvesting the loss.

Time harvesting carefully. Short-term losses are more valuable for offsetting short-term gains taxed at higher ordinary rates. Long-term losses offset long-term gains taxed at preferential rates. Ideally, match loss character to gain character, though any losses eventually provide value.