Capital Gains Tax Calculator (Long-Term and Short-Term)

What Are Capital Gains?

When you sell an investment for more than you paid for it, that profit is known as a capital gain. Our capital gains calculator can help you estimate the tax implications of your investment decisions before you make them. This will allow you to input your purchase price, sale price, holding period, and tax bracket to determine how much you might owe in taxes. Whether you're selling stocks, real estate or other assets, they can provide valuable insights into the potential tax consequences of your decisions. 

A financial advisor can help you manage your investment portfolio and make sure it's maintained to live up to your long-term goals. Speak with an advisor today.

If you're reading about capital gains, it probably means your investments have performed well, or you're preparing for when they do in the future. When you have built a low-cost, diversified portfolio and the assets being held are worth more than what you paid for them, you might consider selling some of those assets to realize those capital gains. 

Capital gains are defined as the profits that you make when you sell investments like stocks or real estate. These include short-term gains for investments held and sold in less than one year and long-term gains for those held and sold in a period that is over a year. Capital gains and losses will either increase or decrease the value of your investment, but you only have to pay capital gains taxes after selling an investment as the money you make from an investment is subject to taxation at the federal and state levels. However, you should also note that you might be able to lower your capital gains taxes with the sale of an investment that is losing money, which could be a strategy to lower your capital gains obligation. 

There are many things to learn in order to fully understand how capital gains might impact your individual situation. For example, certain assets receive special treatment under capital gains tax rules, which we will discuss below. 

Short-Term vs. Long-Term Capital Gains

Short term capital gains are profits earned from selling assets that you've owned for one year or less. Common assets that generate short-term capital gains include stocks, bonds, mutual funds, real estate and collectibles. Long-term capital gains are profits earned from selling assets that you've owned for more than one year. These gains receive preferential tax treatment compared to short-term gains, making them an important consideration in investment strategy.

Short-term capital gains face higher tax rates than their long-term counterparts. These profits are taxed as ordinary income, meaning they're subject to your regular income tax bracket, which can range from 10% to 37% depending on your total income. This higher tax burden often makes frequent trading less tax-efficient for investors who might otherwise consider a short-term investment strategy.

Long-term capital gains enjoy preferential tax treatment designed to encourage patient investing. These rates are significantly lower than ordinary income rates, currently set at 0%, 15%, or 20% based on your income level. Many investors, particularly those in higher tax brackets, can save substantially by holding investments beyond the one-year mark before selling.

Timing your investment sales can dramatically affect your tax liability. Waiting just a few extra days to cross the one-year threshold might convert a short-term gain into a long-term gain, potentially saving thousands in taxes. This timing strategy becomes especially important when planning year-end investment decisions or when considering liquidating significant positions.

Capital Gains Tax Rates

Capital gains tax rates play a crucial role in determining how much of your investment profits actually end up in your pocket. The difference between your purchase price (or "basis") and your selling price determines your capital gain, which is then subject to taxation. As previously mentioned, depending on how long you owned, or held, the asset will determine which of the two tax rate tables yours will be taxed at. 

Taxes on Long-Term Capital Gains

Long-term capital gains are gains on assets you hold for more than one year. They're taxed at lower rates than short-term capital gains.

Depending on your regular income tax bracket, your tax rate for long-term capital gains could be as low as 0%. Even taxpayers in the top income tax bracket pay long-term capital gains rates that are nearly half of their income tax rates. That's why some high net worth Americans don't pay as much in taxes as you might expect.

The table below breaks down how much you would owe in long-term capital gains for tax year 2024 (which is filed in 2025), based on your tax-filing status and income:

The next table shows the long-term capital gains tax rates and brackets for tax year 2025 (which is filed in early 2026), based on your tax-filing status and income:

Taxes on Short-Term Capital Gains

Short-term capital gains are gains you make from selling assets held for one year or less. They're taxed like regular income, which means you pay the same tax rates that are paid for federal income taxes. 

For tax year 2024 (which is filed in early 2025), single investors earning over $609,350 will pay a maximum of 37% on short-term capital gains. The table below breaks down the income brackets for each filing status for the 2024 tax year:

This table shows the same short-term capital gains tax rates and brackets, but for tax year 2025 (which is filed in early 2026):

So, the amount you pay in federal capital gains taxes is based on the size of your gains, your federal income tax bracket and how long you have held on to the asset in question. But to figure out the size of your capital gains, you need to know your basis. Basis is the amount you paid for an asset. How much you owe in taxes, which is your tax liability, stems from the difference between the sale price of your asset and the basis you have in that asset. In plain English, that means you pay tax based on your profit.

How to Estimate How Much You’ll Pay in Capital Gains

To calculate your potential capital gains taxes using our calculator, first determine if your gain is short-term (assets held for one year or less) or long-term (assets held longer than one year). Short-term gains are taxed at your ordinary income tax rate, which could be as high as 37% depending on your tax bracket. Long-term gains receive preferential treatment, with most taxpayers paying either 0%, 15% or 20% based on their income.

Next, subtract your cost basis (what you paid for the asset plus any qualifying expenses) from the sale price to find your actual gain. For example, if you bought stock for $5,000 and sold it for $8,000, your capital gain would be $3,000. You can then use the tables above to multiply your capital gain by the percentage that you fall into. It's important make sure you've timed the sale right if you're trying to avoid paying more than you need to. 

How Active and Passive Income Impact Capital Gains

Why the difference between the regular income tax and the tax on long-term capital gains at the federal level? It comes down to the difference between active and passive income. In the eyes of the IRS, these two forms of income are different and deserve different tax treatment.

Active income is what you make from your job. Whether you own your own business or work part-time at the coffee shop down the street, the money you make is active income because you are receiving money for something you're personally doing. 

Passive income comes from interest, dividends and capital gains. It's money that you make in a passive way, likely because of an asset you own instead of work that you do. Even if you're actively day trading on your laptop, the income you make from your investments is considered passive. So in this case, "unearned" doesn't mean you don't deserve that money. It simply denotes that you earned it in a different way than through a typical salary.

The question of how to tax passive income has become a political issue. Some say it should be taxed at a rate higher than the active income tax rate, because it is money that people make without working. Others think the rate should be even lower than it is, so as to encourage the investment that helps drive the economy.

How to Lower Capital Gains Taxes

One effective way to lower capital gains taxes is by utilizing tax-advantaged accounts like IRAs or 401(k)s. Investments held within these accounts can grow tax-free or tax-deferred, meaning you won't pay capital gains taxes on the growth until you withdraw the funds. This strategy is particularly beneficial for long-term investments, as it allows your money to compound without the drag of taxes.

As discussed previously, timing your asset sales can also play a crucial role in minimizing capital gains taxes. By holding onto investments for more than a year, you can take advantage of the lower long-term capital gains tax rates. This approach not only reduces your tax liability but also aligns with a long-term investment strategy, which can be beneficial for wealth accumulation.

Gifting appreciated assets to family members or charities can be another way to manage capital gains taxes. When you gift an asset, the recipient assumes your cost basis, potentially allowing them to benefit from lower tax rates if they are in a lower tax bracket. Additionally, assets passed on through inheritance receive a "step-up" in basis, meaning the asset's value is reset to its market value at the time of the original owner's death, potentially eliminating capital gains taxes on any appreciation that occurred during the original owner's lifetime.

Lowering Capital Gains With Tax-Loss Harvesting

No one likes to face a large tax bill in April. Of the many ways to lower your tax liability, tax-loss harvesting is among the more common - and the more complicated.

Tax-loss harvesting is a strategy that allows investors to avoid paying capital gains taxes. It uses the money that you lose on an investment to offset the capital gains that you earned on the sale of profitable investments. This means that you can write off those losses when you sell the depreciated asset, which cancels out some or all of your capital gains on appreciated assets. 

You can even wait and re-purchase the assets you sold at a loss if you want them back, but you'll still get a tax write-off if you time it right. Some robo-advisor firms have found ways to automate this process by frequently selling investments at a loss and then immediately buying a very similar asset. This allows you to stay invested in the market while still taking advantage of the tax deductions from your losses.

Some investors include tax-loss harvesting in their overall portfolio investment strategy to save money. Others say that it costs you more in the long run because you're selling assets that could appreciate in the future for a short-term tax break. And if you repurchase the stock, you're essentially deferring your capital gains taxation to a later year. Critics of tax-loss harvesting also point out that since Congress can make changes to the tax code, you could also run the risk of paying high taxes when you sell your assets later.

Other Considerations for Capital Gains Taxes

It's crucial to be aware of the various distinctions in regards to capital gains in order to effectively manage your tax liabilities and maximize your investment returns. You need to think through whether you might need to pay state taxes on capital gains, how the sale of real property might be impacted and more. Here are the most important considerations to keep in mind beyond the basis of how the tax works. 

1. State Taxes on Capital Gains

Some states also levy taxes on capital gains. Most states tax capital gains according to the same tax rates they use for regular income. So, if you're lucky enough to live somewhere with no state income tax, you won't have to worry about capital gains taxes at the state level. For reference, there are current, at the time of writing, eight states that don't tax on capital gains. These are Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming. 

However, that doesn't mean you won't see any tax at all. New Hampshire, for example, doesn't tax income, but does tax dividends and interest. By comparison, states with high income tax California, New York, Oregon, Minnesota, New Jersey and Vermont) also have high taxes on capital gains too. The state with the highest charge in capital gains is California while the smallest tax (that isn't zero) is North Dakota. 

A capital gains calculator like ours takes both federal and state taxation into account. Consider our breakdown of capital gains tax by state for a more complete reference

2. Capital Gains Taxes on Real Property

If you own a home, you may be wondering how the government taxes profits from home sales. As with other assets such as stocks, capital gains on a home are equal to the difference between the sale price and the seller's basis.

Your basis in your home is what you paid for it, plus closing costs and non-decorative investments you made in the property, like a new roof. You can also add sales expenses like real estate agent fees to your basis. Subtract that from the sale price and you get the capital gains. When you sell your primary residence, $250,000 of capital gains (or $500,000 for a couple) are exempted from capital gains taxation. This is generally true only if you have owned and used your home as your main residence for at least two out of the five years prior to the sale.

If you inherit a home, you don't get the $250,000 exemption unless you've owned the house for at least two years as your primary residence. However, you can still get a break if you don't meet that criteria. When you inherit a home you get a "step up in basis."

For example, let's say your mother's basis in the family home was $200,000. Today the market value of the home is $300,000. If your mom passes on the home to you, you'll automatically get a stepped-up basis equal to the market value of $300,000. If you sell the home for that amount then you don't have to pay capital gains taxes. If you later sell the home for $350,000 you only pay capital gains taxes on the $50,000 difference between the sale price and your stepped-up basis. If you’ve owned it for more than two years and used it as your primary residence, you wouldn’t pay any capital gains taxes.

Stepped-up basis is somewhat controversial and might not be around forever. As always, the more valuable your family's estate, the more it pays to consult a professional tax adviser who can work with you on minimizing taxes if that's your goal.

3. Net Investment Income Tax (NIIT)

Under certain circumstances, the net investment income tax, or NIIT, can affect income you receive from your investments. While it mostly applies to individuals, this tax can also be levied on the income of estates and trusts. The NIIT is levied on the lesser of your net investment income and the amount by which your modified adjusted gross income (MAGI) is higher than the NIIT thresholds set by the IRS. These thresholds are based on your tax filing status, and they go as follows:

• Single: $200,000
• Married filing jointly: $250,000
• Married filing separately: $125,000
• Qualifying widow(er) with dependent child: $250,000
• Head of household: $200,000

The NIIT tax rate is 3.8%. The tax only applies for U.S. citizens and resident aliens, so nonresident aliens are not required to pay it. According to the IRS, net investment income includes interest, dividends, capital gains, rental income, royalty income, non-qualified annuities, income from businesses that are involved in the trading of financial instruments or commodities and income from businesses that are passive to the taxpayer.

Here's an example of how the NIIT works: Let's say you file your taxes jointly with your spouse and together you have $200,000 in wages. The threshold for your filing status is $250,000, which means you don't owe the NIIT solely based on that income. However, you also have $75,000 in net investment income from capital gains, rental income and dividends, which pushes your total income to $275,000. Because your income is now $25,000 past the threshold, and that number is the lesser of $75,000 (your total net investment income), then you would owe taxes on that $25,000. At a 3.8% tax rate, you'd have to pay $950.

How to Plan for Capital Gains Taxes

Planning for capital gains is a crucial step for investors looking to sell assets this year. By understanding the tax implications and implementing strategic approaches, you can potentially minimize your tax burden and maximize your investment returns. Here are key strategies to consider when planning for capital gains on your investment sales.

• Understand your capital gains tax rate: Make sure you use the tables above to determine what your rate is going to be so that you can accurately estimate what you might owe well in advance.
• Time your sales strategically: Spreading sales across different tax years might keep you in a lower tax bracket. Consider selling investments gradually rather than all at once, especially if the sale would push you into a higher tax bracket or from long-term status to short-term in a given year.
• Leverage tax-advantaged accounts: Selling investments within retirement accounts like 401(k)s or IRAs allows you to avoid immediate capital gains taxes. These accounts offer tax-deferred or tax-free growth, making them ideal for higher-turnover investment strategies.
• Consult with a tax professional: Tax laws are complex and constantly changing. A qualified tax advisor can provide personalized guidance based on your specific financial situation and help identify opportunities you might otherwise miss.

Planning for capital gains requires careful consideration of your overall financial picture and long-term goals. By implementing these strategies and staying informed about tax regulations, you can make more tax-efficient decisions when selling your investments this year.

Financial Planning Tips

• A financial advisor has the expertise you need to deal with everything from making a retirement plan to managing you investments and preparing for next year's tax bill. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Consider using our investment calculator so you can estimate how your investments might grow over time, and can start planning ahead for a good time period to realize any gains.