Capital Gains Tax Calculator 2020

Flag of AmericaCASAPLORERTrusted and Transparent

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.

Initial Purchase Price
$
Selling Price
$
Length of Ownership
Total Employment Income
$
Filing Year
Filing Status
$750
Capital Gains Tax
100%
Capital Gains:
$5,000
Amount of Capital Gain Taxed at 0%:
$0
Amount of Capital Gain Taxed at 15%:
$5,000
Amount of Capital Gain Taxed at 20%:
$0
Total Capital Gains Tax:
$750

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 at in the past. Capital gains tax is paid on all types of assets from stocks, bonds, to properties and antique art. The amount of capital gains that are owed, depends on your income, filing status, and length of ownership.

For example:

Purchase Price of Stocks = $10,000
Selling Price of Stock = $12,000
Capital Gains = Selling Price – Purchase Price = $12,000 - $10,000 = $2,000

Capital gains tax is only paid on ‘realized’ profits and not on ‘unrealized’ profits. ‘Realized’ profits refers to investments that have been sold and are liable to be taxed, as compared to ‘unrealized’ which are unsold investments that are not taxed till 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, it is considered ‘unrealized’ gains and is not taxed.

What is short-term capital gains tax?

Short-term capital gains tax refers to taxes that have to be paid on profits for investments that have been held for 1 year or less. If you choose to sell the investment in a short period of time, such as within a month, you will have to pay short-term capital gains tax. Short-term capital gains tax rates are generally higher than long-term capital gains tax rates. Short-term capital gains are determined by your income tax rate as it is taxed like your regular income.

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.

What is a 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 greater 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 selecting the duration of the investment.

How does capital gains tax work?

Capital gains tax as shown above is calculated on the realized gain on your investments when you sell. You can also make a loss on an investment and claim it as a tax loss:

  1. Capital gains tax applies to all types of investment – stocks, bonds, properties, cars, and other tangible items.
  2. The profit you make from selling an item at a higher price is your capital gain. If you sell an item for less than what you purchased it then you have a capital loss.
  3. 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.
  4. The difference between your capital gain and loss is known as your Net Capital Gain.
  5. If your capital loss is greater than your capital gain, then you can claim a tax deduction of up to $3,000 per year.
  6. 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.

  1. Long Term Capital Gains Tax Rates 2021
  2. Filing Status0% Rate15% Rate20% Rate
    Single FilersUp to $40,400$40,401 - $445,850Over $445,850
    Married, Filing JointlyUp to $80,800$80,801 - $501,600Over $501,600
    Married, Filing SeparatelyUp to $40,400$40,401 - $250,800Over $250,800
    Head of HouseholdUp to $54,100$54,101 - $473,750Over $473,750
  3. Long Term Capital Gains Tax Rates 2020
  4. Filing Status0% Rate15% Rate20% Rate
    Single FilersUp to $40,000$40,001 - $441,450Over $441,450
    Married, Filing JointlyUp to $80,000$80,001 - $496,600Over $496,600
    Married, Filing SeparatelyUp to $40,000$40,001 - $248,300Over $248,300
    Head of HouseholdUp to $53,600$53,601 - $469,050Over $469,050
  5. Short Term Capital Gains Tax Rates 2021
  6. Tax RateSingle FilersMarried, Filing JointlyMarried, Filing SeparatelyHead 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 $523,601Over $628,301Over $314,151Over $523,601
  7. Short Term Capital Gains Tax Rates 2020
  8. Tax RateSingle FilersMarried, Filing JointlyMarried, Filing SeparatelyHead of Household
    10%$0 - $9,875$0 - $19,750$0 - $9,875$0 - $14,100
    12%$9,876 - $40,125$19,751 - $80,250$9,876 - $40,125$14,101 - $53,700
    22%$40,126 - $85,525$80,251 - $171,050$40,126 - $85,525$53,701 - $85,500
    24%$85,526 - $163,300$171,051 - $326,600$85,526 - $163,300$85,501 - $163,300
    32%$163,301 - $207,350$326,601 - $414,700$163,301 - $207,350$163,301 - $207,350
    35%$207,351 - $518,400$414,701 - $622,050$207,351 - $311,025$207,351 - $518,400
    37%Over $518,401Over $622,051Over $311,026Over $518,401

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

  1. Total Employment Income in 2020 = $150,000
  2. Purchase Price of Investment = $30,000
  3. Selling Price of Investment = $60,000
  4. Length of Ownership – More than a Year
  5. Tax Filing Status – Single
Calculations:
Capital Gains = $30,000 ($60,000 - $30,000)
Total Taxable Income = $180,000 ($150,000 + $30,000)
Long Term Capital Gains Tax Rate in 2020 for $180,000 = 15%
Capital Gains Tax = Capital Gain x Tax Rate = $4,500 x ($30,000 * 15%)

Short Term Capital Gains Example

  1. Total Employment Income in 2020 = $150,000
  2. Purchase Price of Investment = $10,000
  3. Selling Price of Investment = $15,000
  4. Length of Ownership – Less than a Year
  5. Tax Filing Status – Single
Calculations:
Capital Gains = $5,000 ($15,000 - $10,000)
Total Taxable Income = $155,000 ($150,000 + $5,000)
Short Term Capital Gains Tax Rate in 2020 for $155,000 = 24%
Capital Gains Tax = Capital Gain x Tax Rate = $1,200 ($5,000 * 24%)

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.

Any calculators or content on this page is provided for general information purposes only. Casaplorer does not guarantee the accuracy of information shown and is not responsible for any consequences of its use.