Capital Gains Tax Calculator

Capital gains tax in plain English

When you sell an investment for more than you paid, the profit is a capital gain. How much tax you owe depends almost entirely on one factor: how long you held it. The federal government rewards patient investors with dramatically lower rates on long-term gains, and treats short-term traders like ordinary wage earners.

The one-year line

If you sell an asset after holding it for one year or less, your gain is short-term and taxed at your ordinary income tax rate, which can run as high as 37 percent. Hold it for more than one year and it becomes long-term, eligible for the preferential 0, 15, or 20 percent rate. The math on that one extra day of holding can be enormous.

How 0, 15, and 20 percent stack

Long-term gains are stacked on top of your other taxable income. For single filers in 2025, the 0 percent rate applies to combined income up to $48,350, the 15 percent rate up to $533,400, and 20 percent above that. For married filing jointly the thresholds roughly double. A retiree with modest ordinary income can realize meaningful gains at a 0 percent federal rate, which is one of the most underused tax planning tools in the code.

The 3.8 percent NIIT

On top of the regular capital gains tax, higher earners owe an additional 3.8 percent Net Investment Income Tax. It kicks in at $200,000 modified adjusted gross income for singles and $250,000 for married filing jointly. So a top-bracket long-term gain is really taxed at 23.8 percent federal (20 percent plus NIIT), not 20 percent.

Your primary home is special

Under IRS Section 121, you can exclude up to $250,000 of gain on the sale of your primary residence if you are single, and $500,000 if you are married filing jointly. You must have owned and lived in the home for at least 2 of the last 5 years. This exclusion is one of the biggest tax breaks in the code and turns most home sales into tax-free events.

Step-up in basis for heirs

When appreciated assets pass at death, the cost basis usually resets to the fair market value on the date of death. Decades of unrealized appreciation can disappear for tax purposes. This is why financial planners often say "die with your winners" and gift low-basis appreciated stock only during life if there is a specific reason.

Simple ways to lower the bill

Hold assets more than a year when you can. Harvest losses in taxable accounts to offset gains. Consider donating appreciated stock to charity rather than cash. Time large realizations for low-income years. And always run the numbers before you sell, not after.