Capital Gains Tax Calculator
Estimate federal capital gains tax on your investment sale.
✓ Plan your investment sales strategically. Know exactly how much federal tax you'll owe on gains and optimize your selling decisions.
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Short-Term vs. Long-Term Capital Gains
The IRS taxes capital gains differently based on how long you held the investment:
Short-Term Gains: Assets held 1 year or less. Taxed as ordinary income at your marginal tax rate (10%-37%). This can be significantly higher than long-term rates.
Long-Term Gains: Assets held more than 1 year. Taxed at preferential rates: 0%, 15%, or 20%. Much more favorable than short-term treatment.
The 1-Year Holding Period Rule
Holding an investment just one day over 12 months can save you thousands in taxes. For example, a $100,000 gain could be taxed at 24% (short-term) vs. 15% (long-term)—a $9,000 difference. This is why experienced investors time sales strategically.
Tax-Loss Harvesting Strategy
Offset capital gains by selling losing investments. You can deduct up to $3,000 in losses against ordinary income yearly, with excess losses carrying forward indefinitely. This strategy reduces total tax liability while rebalancing your portfolio.
Capital Gains Planning Tips
- Hold 1+ Year: Long-term rates are dramatically lower. If possible, wait past the 1-year mark.
- Time Your Sales: Sell in low-income years (sabbaticals, between jobs) to lower your bracket and tax rate.
- Use Tax-Loss Harvesting: Offset gains with losses to reduce overall tax.
- Donate Appreciated Stocks: Donating appreciated securities to charity avoids capital gains tax while deducting fair market value.
- Inherited Assets: Inherited stocks receive a "step-up in basis"—you pay tax only on gains since death, not the entire appreciation.
- State Taxes: Remember to account for state capital gains taxes, which vary widely.
Frequently Asked Questions
Get answers to common questions about this calculator
Q: What's the difference between cost basis and sale price?▼
A: Cost basis is what you paid for the investment (adjusted for splits, dividends, etc.). Sale price is what you sold it for. Capital gain is sale price minus cost basis. Accurately tracking cost basis is crucial for accurate tax reporting and avoiding overpayment.
Q: Can I reduce capital gains taxes?▼
A: Yes. Strategies include: (1) holding longer than 1 year for lower rates, (2) tax-loss harvesting to offset gains, (3) donating appreciated securities to charity, (4) timing sales in lower-income years, and (5) using retirement accounts (which avoid capital gains taxes). Consult a tax professional for your situation.
Q: What if I have more losses than gains?▼
A: You can deduct up to $3,000 of net capital losses against ordinary income per year. Excess losses carry forward to future years indefinitely. So if you lose $10,000, you can deduct $3,000 this year and $3,000 next year (plus the year after) without expiration.
Q: Do I report capital gains on my tax return?▼
A: Yes. You'll receive a 1099-B from your broker and must report capital gains/losses on Schedule D of your tax return. The IRS matches broker reports to your return, so accurate reporting is essential to avoid penalties.