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This capital gains tax calculator can help you estimate your tax liability on the money you make from selling capital assets.
How to Use This Capital Gains Tax Calculator
When you sell an asset like real estate, cryptocurrency, or stock, you pay a tax on the amount that asset appreciated since you purchased it.
This capital gains tax fluctuates based on a few factors. The biggest factors in your capital gains taxes are:
- How long you’ve held the asset (short-term or long-term)
- How much you paid for it originally
- How much you sold it for
- Your income
- IRS Tax filing status
You can use this calculator to estimate capital gains tax on real estate and other assets, but remember that tax rates change yearly.
How Much Taxes Will I Pay?
This capital gains calculator can help you estimate the taxes you’ll pay on capital gains. Before selling your appreciable assets, consider some factors:
- Short-term assets (assets you own for less than one year) are taxed as regular income. This can be significantly higher than your capital gains tax on long-term assets.
- You can deduct capital losses from your capital gains taxes up to a limit. Talk to a tax professional to determine how a gain or loss will impact your tax burden.
- Collectibles like antiques, coins, and fine art are taxed at a higher rate than other kinds of capital gains.
Capital Gains Definitions
Capital gains tax: When you own an asset like stock or cryptocurrency, you don’t pay taxes when the value goes up, because the value may go down again before you sell it.
Instead, you pay capital gains tax when you realize the gains by selling the asset.
Short-term capital gains: Assets you own for less than a year are taxed as normal income at a higher rate than long-term capital gains.
This rate is based on your taxable income and filing status.
Long-term capital gains: Unlike short-term capital gains, long-term gains are taxed at a lower rate. Depending on your income and filing status, you may not owe any capital gains taxes at all.
Earned income: The money you make in exchange for work is earned income. This includes the wages or salary you earn from an employer, income from self-employment, tips you’ve earned, and any other taxable compensation.
Unearned income: In contrast to earned income, unearned income is passive or portfolio income that you earn from sources such as investment properties, interest, or capital gains.
Unearned income contributes to your tax burden but isn’t subject to payroll taxes.
Tax-loss harvesting: While you have to pay taxes on capital gains, you may be able to deduct capital losses to decrease your tax burden.
Tax-loss harvesting is a strategy to realize capital losses to defer capital gains taxes.
Net Investment Income Tax (NIIT): Capital gains is only one type of investment income. Other types of investment income like dividends and interest contribute to your modified adjusted gross income (MAGI).
If your MAGI is over a certain amount (determined by your filing status), you may owe an additional net investment income tax (NIIT).
Tax filing status: There are five tax filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child.
Your filing status along with your income will determine your tax rate.
Holding period: A holding period is the amount of time you hold onto an asset before selling it. A holding period of less than a year is short-term, while a long-term holding period is a year or longer.
Marginal federal tax rate: Rather than paying a uniform tax rate, you pay different interest rates on different portions of your income.
The lowest bracket of your income is taxed at the lowest rate, while the portions of your income in higher brackets are taxed at higher rates.
How do capital gains taxes work?
You don’t pay any capital gains taxes until you realize the gain—in other words, you don’t pay taxes until you sell the asset.
When you realize capital gains, you can use a capital gains tax calculator to estimate your tax burden.
Which assets qualify for the capital gains tax?
Not all assets qualify for capital gains taxes. Capital assets like stock, cryptocurrency (including NFTs), real estate, jewelry, and precious metals are subject to capital gains tax.
How can I avoid capital gains tax?
You can avoid capital gains taxes by offsetting your gains with capital losses or deductions like charitable contributions, lowering your tax bracket, or the simplest solution: not selling your assets.
How do I report gains or losses on my tax return?
You can report capital gains or losses on Form 1040 Schedule D Capital Gains and Losses as well as Form 1040 U.S. Individual Income Tax Return.
Refer to IRS guidelines or speak to a tax professional for more information on reporting capital gains and losses.