📊 Your Capital Gains Analysis
Total Capital Gain
$0.00
Profit from asset sale
Tax Liability
$0.00
Amount owed to IRS
Federal Tax:
$0.00
State Tax:
$0.00
Net Investment Income Tax (3.8%):
$0.00
Total Tax Rate:
0%
Net Proceeds After Tax
$0.00
Amount you keep after taxes
Tax Optimization Tips
✅ Hold assets over 1 year for lower rates
✅ Consider tax-loss harvesting strategies
✅ Utilize retirement accounts for tax deferral
✅ Gift assets to family in lower tax brackets
📚 Understanding Capital Gains Tax
Capital gains tax is levied on profits from the sale of capital assets like stocks, bonds, real estate, and cryptocurrencies. The tax rate depends on your holding period and income level[citation:1][citation:4].
What Constitutes a Capital Gain?
A capital gain occurs when you sell an asset for more than its adjusted cost basis. The gain is the difference between the sale price and your basis (purchase price plus eligible costs)[citation:1][citation:7].
Key Tax Rate Differences
Long-term vs Short-term Rates (2026)
Short-term gains (assets held ≤1 year) are taxed at ordinary income rates (10%-37%)[citation:1][citation:7].
Long-term gains (assets held >1 year) enjoy preferential rates of 0%, 15%, or 20% depending on income[citation:1][citation:4].
0% Rate Income ≤ $96,700 (married joint)
15% Rate $96,701 - $600,050
20% Rate Income > $600,050
Real-World Calculation Examples
Example 1: Stock Investment
Scenario: Purchased 100 shares at $50 each ($5,000), sold 2 years later at $120 per share ($12,000). Additional costs: $200 in fees.
Calculation: Capital Gain = $12,000 - $5,000 - $200 = $6,800
Tax: Assuming 15% long-term rate → $6,800 × 15% = $1,020 federal tax
Net Proceeds: $12,000 - $200 - $1,020 = $10,780
Example 2: Real Estate with Depreciation
Scenario: Rental property purchased for $300,000, $80,000 depreciation taken, sold for $500,000[citation:1].
Calculation: Adjusted basis = $300,000 - $80,000 = $220,000
Gain: $500,000 - $220,000 = $280,000
Tax Treatment: $80,000 taxed at 25% (depreciation recapture), $200,000 at 15% long-term rate[citation:1].
Total Tax: ($80,000 × 25%) + ($200,000 × 15%) = $20,000 + $30,000 = $50,000
Special Considerations & Tax Strategies
- Home Sale Exclusion: Up to $250,000 ($500,000 married) exclusion on primary residence gains[citation:8]
- Tax-Loss Harvesting: Offset gains with investment losses[citation:7]
- Step-Up Basis: Inherited assets receive basis adjustment to fair market value[citation:1]
- Like-Kind Exchanges: Defer tax on certain real estate exchanges[citation:2]
- Retirement Accounts: Tax-deferred growth in IRAs and 401(k)s[citation:7]
Reporting Requirements & Compliance
Capital gains must be reported on IRS Form 8949 and Schedule D[citation:7]. Real estate transactions may have additional reporting requirements. The 3.8% Net Investment Income Tax applies to high-income taxpayers[citation:1][citation:2].
❓ Frequently Asked Questions
What's the difference between short-term and long-term capital gains?
Short-term capital gains apply to assets held one year or less and are taxed at ordinary income rates (10%-37%). Long-term gains apply to assets held more than one year and receive preferential rates of 0%, 15%, or 20% depending on your taxable income[citation:1][citation:7].
How is cost basis calculated for capital gains?
Cost basis typically includes purchase price plus acquisition costs (broker fees, commissions), improvement costs, and certain carrying charges. For inherited assets, you generally get a stepped-up basis to fair market value at date of death[citation:1][citation:4].
What is the Net Investment Income Tax (NIIT)?
The NIIT is a 3.8% surtax that applies to investment income for high-income taxpayers (MAGI over $200,000 single/$250,000 married). It applies to capital gains, dividends, interest, and other passive income[citation:1][citation:2].
Are there any exemptions from capital gains tax?
Yes, several exemptions exist: primary residence exclusion ($250,000 single/$500,000 married), like-kind exchanges for real estate, gains on qualified small business stock, and transfers to charities. Retirement accounts also provide tax deferral[citation:4][citation:8].
How can I reduce my capital gains tax liability?
Strategies include: holding assets long-term, tax-loss harvesting, using retirement accounts, gifting appreciated assets, charitable donations of appreciated property, like-kind exchanges, and timing sales to control income levels[citation:6][citation:7].
What records do I need for capital gains reporting?
Maintain records of purchase/sale dates, prices, commission statements, improvement receipts, dividend reinvestment records, and inheritance/gift documentation. Keep these for at least 7 years after filing[citation:4][citation:7].
How are cryptocurrency gains taxed?
Cryptocurrency is treated as property for tax purposes. Each trade or sale is a taxable event. Like other assets, holding period determines short-term vs long-term treatment. Specific identification of units is crucial for accurate basis calculation[citation:4][citation:6].