Capital Gains Tax Calculator 2021
Our capital gains tax calculator determines the total tax that you will have to pay on the profit or capital gain you earned from selling an asset. Capital gains can be short-term where the asset is sold in 1 year or less, or it can be long-term capital gain where the asset is sold after 1 year.
What Is Capital Gains Tax?
Capital gains tax is the tax paid on the profits incurred from selling an asset at a price higher than what it was bought for. Capital gains tax is paid on all types of assets including stocks, bonds, properties, and antique art. The amount of capital gains that are owed depends on your income, filing status, and length of ownership.
Capital gains tax is only paid on ‘realized’ profits and not on ‘unrealized’ profits. Profits become ‘realized’ when they are sold and are liable to be taxed, while profits are ‘unrealized’ when they are unsold investments that are not taxed until they are sold.
For example, in the above example, you will only have to pay capital gains tax on the $2,000 if the investment is sold. If it appreciates and remains in your portfolio unsold, profits are considered ‘unrealized’ gains and are not taxed.
What You Should Know
- Capital gains tax is the tax paid on profits you make from selling an investment for more than it was purchased for
- Short-term capital gains are when you buy an investment and sell it in a year or less
- Long-term capital gains are when you hold an investment for more than a year after purchased
- Short-term capital gains are treated as income and are taxed at your marginal income tax rate but long-term capital gains are taxed at a rate of 0%, 15%, or 20% depending on your total income
- Capital losses can be used to offset capital gains and can be carried forward to future tax years
- Policies on how capital gains are treated vary by state
What Is Short-Term Capital Gains Tax?
Short-term capital gains refer to taxes that have to be paid when you buy an investment at a certain price and you sell it at a higher price within 1 year. This means that if you choose to sell an investment after a short period of time, you will have to pay short-term capital gains taxes. Short-term capital gains tax rates are generally higher than long-term capital gains tax rates. This is done to encourage investors to hold investments for a longer period of time.
For example, if you bought a property in January 2021 and sold it in May 2021, which is less than 1 year, you will have to pay short-term capital gains tax on any profits. Our calculator can be used as a short-term capital gain calculator by selecting the duration of the investment.
The amount you can be taxed on the short-term capital gains depends on your income tax rate. This means that the tax rate can be anywhere from 10% to 37% depending on your household income. Keep in mind that the short-term capital gains have to be added to your income first to determine the tax rate and not the other way around. Short-term capital gains increase your taxable income and could push you into a higher tax bracket. You should consider these factors before deciding to sell an investment to realize your gains.
Short-term capital gains can be offset by short-term capital losses. That is, if you buy and sell two investments throughout the year, one of which makes a capital gain and the other a capital loss, you can deduct the loss from your gain to figure out your net short-term capital gain. However, if you incur a short-term capital gain and a long-term capital loss, you cannot use the long-term loss to offset the short-term gain.
What Is Long-Term Capital Gains Tax?
Long-term capital gains tax refers to taxes that have to be paid on profits for investments that have been held for longer than a year. The long-term capital gains tax rate is usually 0%, 15%, and 20%, depending on your income and filing status.
For example, if you bought art in January 2021 and sold it in January 2031, which is after longer than 1 year, you will have to pay long-term capital gains tax on any profits. Our calculator can be used as a long-term capital gain calculator by increasing the duration of the investment.
The tax rate you pay on long-term capital gains can be 0%, 15%, or 20% depending on how much your annual income is. The brackets for these tax rates can also differ according to your filing status. The tax rates on long-term capital gains are generally lower than for short-term capital gains, which incentivizes investors to hold their investments longer and avoid paying hefty short-term rates.
Long-term capital gains can only be offset by long-term losses. This means that if you incur a capital gain from the sale of one asset and a capital loss from another asset, you can deduct the capital loss from the capital gain, thus lowering your capital gains tax liability. In the case that your capital losses exceed your capital gains, you can claim a maximum of $3000 ($1500 if married and filing separately) to lower your income. If the capital loss exceeds the limit, you can also carry them forward to another year and apply these capital losses in the future.
Short Term vs Long Term Capital Gains Tax
Holding period of investment → When you hold your investment for 1 year or less before you sell it, your capital gain (or loss) is classified as a short-term capital gain (loss). When you hold your investment for more than one year before selling it, your gain (or loss) will be a long-term capital gain (loss).
Taxing Rules → Short-term capital gains are taxed like regular income while long-term capital gains are not.
Tax Rate Ranges → Short-term capital gains can be taxed at a rate from 10% to 37% depending on your income tax bracket. Long-term capital gains are taxed at a rate of 0%, 15%, or 20%.
Capital losses → Can be used to offset the respective capital gains. Long-term capital gains can be offset by long-term capital losses. Short-term capital gains can be offset by short-term capital losses.
|Comparison||Short-Term Capital Gains||Long-Term Capital Gains|
|Holding period of investment||1 year or less||More than 1 year|
|Taxing Rules||Taxed at the same rate as your income. Tax rate depends on income and tax filing status.||Taxed at the same rate as your income. Tax rate depends on income and tax filing status.|
|Tax rates||10%, 12%, 22%, 24%, 32%, 35%, 37%||0%, 15% or 20%|
|Can losses be carried forward to future years?||Yes, indefinitely||Yes, indefinitely|
How Does Capital Gains Tax Work?
Capital gains tax as shown above is calculated on the realized gain on investments when sold. You can also make a loss on an investment and claim it as a tax loss:
- Capital gains tax applies to all types of investment – stocks, bonds, properties, cars, and many other tangible items.
- The profit you make from selling an item at a higher price is your capital gain. If you sell an item for less than it was purchased for, then you have a capital loss.
- You can reduce your total tax bill by claiming capital losses against capital gains. For example, in 2020, if you have a capital gain of $5,000 and a capital loss of $2,000, your tax will only be applied to $3,000 of capital gain. This is called your Net Capital Gain.
- If your capital loss is greater than your capital gain, then you can claim a tax deduction of up to $3,000 per year.
- Capital gains tax is progressive, just like income taxes.
How Are Capital Gains Taxed?
How Much Is Capital Gains Tax?
Capital gains tax is determined by the rate you are charged on your profits. Capital gains tax rates are determined by your income, filing status, and length of ownership of the asset. Our capital gains tax calculator can provide your tax rate for capital gains.
Long-Term Capital Gains Tax Rates
|Filing Status||0% Rate||15% Rate||20% Rate|
|Single Filers||Up to $40,400||$40,401 - $445,850||Over $445,850|
|Married, Filing Jointly||Up to $80,800||$80,801 - $501,600||Over $501,600|
|Married, Filing Separately||Up to $40,400||$40,401 - $250,800||Over $250,800|
|Head of Household||Up to $54,100||$54,101 - $473,750||Over $473,750|
Short-Term Capital Gains Tax Rates
|Tax Rate||Single Filers||Married, Filing Jointly||Married, Filing Separately||Head of Household|
|10%||$0 - $9,950||$0 – 19,900||$0 - $9,950||$0 - $14,200|
|12%||$9,950 - $40,525||$19,901 - $81,050||$9,951 - $40,525||$14,201 - $54,200|
|22%||$40,526 - $86,375||$81,051 - $172,750||$40,526 - $86,375||$54,201 - $86,350|
|24%||$86,376 - $164,925||$172,751 - $ 329,850||$86,376 - $164,925||$86,351 - $164,900|
|32%||$164,926 - $209,425||$329,851 - $418,850||$164,936 – 209,425||$164,901- $209,400|
|35%||$209,426 - $523,600||$418,851 - $628,300||$209,426 - $314,150||$209,401- $523,600|
|37%||Over $523,601||Over $628,301||Over $314,151||Over $523,601|
Capital Gains by State
Until now, you’ve learned how your capital gain is taxed at the federal level but capital gains are oftentimes taxed at the state level as well. The way different states choose to tax capital gains differs with most of them treating capital gains as income, some offering a flat tax rate for all capital gains, and others not taxing capital gains at all.
California Capital Gain Taxes
The state of California taxes capital gains very differently from the federal government. The most important difference is that in California, capital gains are not classified as short-term capital gains and long-term capital gains. This means that no matter how long you hold an investment, your capital gain will be treated the same way.
Since there is no distinction between long-term and short-term capital gains, all capital gains are treated as income when considered at the state level. The tax rate charged on the capital gains depends on the individual’s income and tax filing status. The rates can be found below:
Capital Gain Tax Rates California
|Tax Rate||Single Filers||Married, Filing Jointly||Head of Household||Married, Filing Separately|
|1%||$0 - $8,932||$0 - $17,864||$0 - $17,864||$0 - $8,932|
|2%||$8,933 - $21,175||$17,865 - $42,350||$17,865 - $42,353||$8,933 - $21,175|
|4$||$21,176 - $33.421||$42,351 - $66,842||$42,354 - $54,597||$21,176 - $33.421|
|6%||$33,422 - $46,394||$66,843 - $92,788||$54,598 - $67,569||$33,422 - $46,394|
|8%||$46,395 - $58,634||$92,789 - $117,268||$67,570 - $79,812||$46,395 - $58,634|
|9.3%||$58,635 - $299,508||$117,269 - $599,016||$79,813 - $407,329||$58635 - $299,508|
|10.3%||$299,509 - $359,407||$599,017 - $718,814||$407,330 - $488,796||$299,509 - $359,407|
|11.3%||$359,408 - $599,012||$718,815 - $1,198,024||$488,797 - $814,658||$359,408 - $599,012|
|12.3%||$599,013 or more||$1,198,025 or more||$814,658 or more||$599,013 or more|
California also charges a 1% Mental Health Services surtax on income above $1,000,000, which is not reflected in the table above. This means that individuals who make more than $1,000,000 effectively pay a 13.3% tax rate on their capital gains.
Texas Capital Gain Taxes
In Texas, personal income and capital gains are not taxed by the state government. Texas is one of the 9 states that do this.
Florida Capital Gain Taxes
Florida does not have personal income taxes or capital gains taxes. Florida is one of the 9 states that do this.
New York Capital Gain Taxes
The state of New York treats all capital gains as income. That is the capital gain you make on selling your investment will be treated as income and taxed at the same rates. Similar to California, New York makes no distinction between long-term and short-term capital gains. No matter when you choose to sell your investment, your capital gain will be taxed at the following rates by the state government:
New York Capital Gain Tax Rates
|Tax Rate||Single||Married, Filing Jointly||Head of household||Married, Filing Separately|
|4%||$0 - $8,500||$0 - $17,150||$0 - $12,800||$0 - $8,500|
|4.5%||$8,501 - $11,700||$17,151 - $23,600||$12,801 - 17,650||$8,501 - $11,700|
|5.25%||$11,701 - $13,900||$23,601 - $27,900||$17,651 - $20,900||$11,701 - $13,900|
|5.9%||$13,901 - $21,400||$27,901 - $43,000||$20,901 - $32,200||$13,901 - $21,400|
|6.09%||$21,401 - $80,650||$43,001 - $161,550||$32,201 - $107,650||$21,401 - $80,650|
|6.41%||$80,651 - $215,400||$161,551 - $323,200||$107,651 - $269,300||$80,651 - $215,400|
|6.85%||$215,401 - $1,077,550||$323,201 - $2,155,350||$269,301 - $1,616,450||$215,401 - $1,077,550|
|8.82%||Over $1,077,550||Over $2,155,350||Over $1,616,450||Over $1,077,550|
States With No Additional Capital Gain Taxes
In 9 U.S. states, capital gains are not taxed by the state government because these states do not tax citizens on their personal income. In Washington, there is a proposed legislation stating that individuals who have earned more than $25,000 on capital gains or a married couple filing jointly who has earned more than $50,000 will be taxed on their capital gains at a rate of 9%. Moreover, New Hampshire and Tennessee do tax income from dividends and interest.
- New Hampshire
- South Dakota
How Is Capital Gains Tax Calculated?
Capital gains tax is calculated using your profits and income to determine your taxable income, which is then multiplied by the rate that you have to pay.
Long Term Capital Gains Example
- Total Employment Income in 2020 = $150,000
- Purchase Price of Investment = $30,000
- Selling Price of Investment = $60,000
- Length of Ownership – More than a Year
- Tax Filing Status – Single
Short Term Capital Gains Example
- Total Employment Income in 2020 = $150,000
- Purchase Price of Investment = $10,000
- Selling Price of Investment = $15,000
- Length of Ownership – Less than a Year
- Tax Filing Status – Single
Frequently Asked Questions
How Is Capital Gain Tax Calculated on the Sale of a Property?
If you are a homeowner or are looking to sell/purchase an investment property, capital gains tax can play a significant role in the decision-making process. Just like other assets such as stocks and bonds, capital gains tax is applied to any profit from selling the investment.
The cost basis is what you paid for the home, any closing costs, and non-decorative investments such as getting a new roof. Other expenses such as real estate agent commission and fees can also be included in the cost. This cost basis can be changed to be called an adjusted basis, such as the adjusted basis increasing if you make any renovations, or decreasing such as through insurance reimbursements. Now you subtract that from the sale price to get the capital gains. Check out our 1031 exchange page to see how you can postpone the payment of capital gains tax on an investment property.
Capital gains from selling primary residences can be deducted. To qualify for this benefit, you must have used the home as your primary residence for at least 2 years out of the last 5-year period before you sell. No other home should be excluded from capital gains in the past 2 years. If you meet these requirements, you can be eligible to exclude $250,000 (single) and $500,000 (married, filing jointly) in gains from a home sale.
If the home is inherited, you cannot make use of the home sale exemption of $250,000 unless you owned the home for at least 2 years as the primary residence. You can also get a tax break on a home known as a “step-up in basis”. For example, if your family member’s home’s cost basis is $300,000, and the current market value is $400,000, once the ownership changes to you, you are stepped up to a cost basis of $400,000. Therefore, if you sell the house in the future for $500,000, you only pay capital gains tax on $100,000 ($500,000 - $400,000).
How to Avoid Capital Gains Tax?
There are several strategies to reduce your total capital gains tax:
- Avoid short-term gains: If you can hold for a year and longer, you should consider avoiding the higher short-term capital gains tax. Long-term capital gains are much lower than short-term for a majority of assets. Our calculator can show you how much you can save by holding on for the long term.
- Exclude home sales: If you sell your primary residence, $250,000 of capital gains can be deducted from the taxation, and $500,000 for married, filing jointly.
- Dividend strategy: Dividends are funds received by a company of which you are a shareholder. Dividends are usually reinvested into the same investment that earned them, rather than doing this, they can be moved to underperforming investments. Usually, rebalancing is done by selling high-performing securities and then investing in underperforming investments, however, the dividend strategy will help you avoid selling high-performing investments and their capital gains tax. Dividends allow you to receive income from your investment without selling the stock for a recognized capital gain.
- Tax-advantage accounts: 401(k) plans, retirement accounts, and college savings accounts are accounts where investments grow tax-free or tax-deferred. You will not have to pay capital gains tax if you sell within these accounts.
- Carry losses over: In a certain tax year, you can only claim a set amount of loss which is $3,000, if your net capital loss exceeds the limit, you can deduct it from next year’s gain.
What Are Rule Exceptions?
The above-stated rates and calculator can be applied to most assets, however, there are a few exceptions to the rule. “Collectible Assets” such as coins, metals, and fine art are taxed at 28% as their long-term capital gains tax rate. The short-term capital gains tax rate is determined using the income tax rate.