Capital Gains Tax Calculator

The single most important distinction in US capital gains taxation is the holding period. Assets held for more than one year before sale qualify for long-term capital gains rates (a preferential 0%, 15%, or 20% federal rate depending on income). Assets held for one year or less generate short-term capital gains, which are taxed as ordinary income at the taxpayer's marginal rate — up to 37% in 2026.

The holding period is measured from the day AFTER acquisition through the day of sale. Buy on April 1 2025 and sell on April 1 2026: holding period is exactly one year, which counts as SHORT-TERM. Sell one day later on April 2 2026: holding period is one year and one day, which counts as LONG-TERM. This one-day precision matters enormously — the tax difference on a $50,000 gain for a middle-income taxpayer can be $3,500 or more.

The lesson is straightforward: if you are within days of the one-year mark on an appreciated position, waiting to cross the threshold is often the highest-return "decision" you can make with the position, provided you accept the market risk of the additional days.

The three preferential long-term rates are 0%, 15%, and 20%, with the bracket determined by total taxable income (ordinary income + long-term gains combined). The brackets are indexed annually to inflation; the 2026 amounts below are from IRS Rev. Proc. 2025-32.

On top of the base capital gains rate, high-income taxpayers pay an additional 3.8% Net Investment Income Tax (NIIT) under 26 USC §1411. NIIT applies to the lesser of net investment income or the amount by which Modified Adjusted Gross Income (MAGI) exceeds a threshold: $200,000 single, $250,000 married filing jointly, $125,000 married filing separately.

A single filer with $250,000 in ordinary income and a $50,000 long-term gain pays 15% on the gain ($7,500) plus 3.8% NIIT on the full $50,000 gain ($1,900), for a combined federal tax of $9,400 — an effective 18.8% federal rate on the gain. High earners in the 20% base bracket effectively pay 23.8% federal (20% + 3.8%) on their long-term gains.

NIIT applies to nearly all forms of investment income: interest, dividends, capital gains, rental income (with material-participation exceptions), and royalties. It does NOT apply to income from an active trade or business, wages, retirement account distributions, or Social Security benefits. This is why timing the sale of a large appreciated position in a low-income year can meaningfully reduce total tax by avoiding both the 20% bracket and the NIIT threshold.

When you sell rental real estate at a gain, part of the gain may be "unrecaptured Section 1250 gain" — taxed at a maximum federal rate of 25% rather than the standard 15% or 20% long-term rate. This recapture applies to the portion of the gain attributable to prior depreciation deductions.

Example: you bought a rental property for $300,000, took $50,000 of depreciation deductions over ten years (reducing adjusted basis to $250,000), and sold it for $400,000. The total gain is $150,000. Of that, $50,000 is unrecaptured Section 1250 gain taxed at 25%, and the remaining $100,000 is standard long-term capital gain taxed at your normal 0/15/20% bracket. Total federal tax on the sale is $12,500 (25% × $50K) + $15,000 (15% × $100K) = $27,500.

The recapture provision limits the tax benefit landlords receive from depreciation deductions — you defer the tax during the holding period, but the deferred tax comes due at 25% at sale, potentially at a rate higher than your then-current ordinary bracket. Depreciation is still valuable (it defers tax at 100% of your then-current bracket in favour of a future 25% recapture rate), but the calculation is more nuanced than a straight long-term-rate calculation.

A capital LOSS realised on a sale is disallowed if the taxpayer buys a "substantially identical" security within 30 days before or after the sale (a 61-day total window). The disallowed loss is added to the cost basis of the replacement position, effectively deferring the loss to a future sale of the replacement rather than eliminating it.

The wash-sale rule matters mostly for tax-loss harvesting strategies. A taxpayer wanting to book a loss on Company A while maintaining market exposure cannot simply sell A and rebuy A the next day — the loss will be disallowed. The workaround is buying a similar-but-not-substantially-identical security (a competing company in the same industry, or an ETF that overlaps but is not identical). What "substantially identical" means precisely is a matter of long-standing IRS interpretation and court rulings.

The wash-sale rule as currently written by the IRS applies to securities. It does not apply to cryptocurrency, which is classified as "property" rather than a security — though legislative proposals to extend the rule to crypto have been repeatedly introduced and may become law in future tax years. As of 2026, crypto tax-loss harvesting without a 30-day wait is legal.

Capital losses can offset capital gains dollar-for-dollar within the same tax year. Short-term losses first offset short-term gains, and long-term losses first offset long-term gains. Any remaining net loss can then offset the other category. Beyond that, up to $3,000/year of net capital loss can offset ordinary income ($1,500 if married filing separately). Losses in excess of these limits carry forward indefinitely to future years.

Tax-loss harvesting is the deliberate practice of selling losing positions to book the loss for tax purposes while maintaining broadly similar market exposure. Executed well, it can add 0.5-1.5% to after-tax annual returns in a diversified portfolio — one of the most reliable "free returns" in retail investing.

The mechanical steps: identify positions with unrealised losses greater than transaction costs, sell them, immediately purchase a similar-but-not-substantially-identical position (avoiding the wash-sale trap), and use the harvested losses to offset gains realised elsewhere in the portfolio or to reduce ordinary income up to $3,000. Automated services (Wealthfront, Betterment, most modern robo-advisors) do this systematically as part of their standard service.

Not all dividends are taxed as ordinary income. "Qualified" dividends receive the same 0/15/20% preferential rate as long-term capital gains. To qualify, the dividend must come from a US corporation (or a qualified foreign corporation) and the taxpayer must have held the stock more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.

Ordinary dividends — including most REIT dividends, MLP distributions, and dividends from stocks held less than the 60-day threshold — are taxed at the taxpayer's marginal ordinary rate. Your 1099-DIV separates these two categories in boxes 1a (ordinary total) and 1b (qualified portion) each January.

For high-earners, the difference between "ordinary" and "qualified" dividend tax treatment can be dramatic — 37% ordinary vs 20% qualified — which is one reason investment portfolios often prefer index-fund equity exposure (mostly-qualified dividends) over REIT-heavy income strategies (mostly-ordinary dividends).

Sales of a primary residence receive one of the largest tax breaks in the US tax code. Under 26 USC §121, single filers can exclude up to $250,000 of gain, and married-filing-jointly couples up to $500,000, from federal capital gains tax on the sale of a primary residence. The exclusion is available once every two years, and the taxpayer must have owned AND used the property as their primary residence for at least 2 of the 5 years preceding the sale.

This is why the capital-gains calculator above intentionally does NOT handle primary-residence sales — the vast majority of homeowners never owe any federal capital gains tax on a home sale because of the §121 exclusion. Only gains exceeding the $250K/$500K threshold trigger tax, and even then only the excess is taxed.

Note that the exclusion applies only to gain, not to the sale price. If you bought a house for $400,000, took no depreciation, and sold it for $700,000, your gain is $300,000. A single filer excludes $250,000 and pays capital gains tax on the remaining $50,000. A married couple excludes the full $300,000 with no tax owed.

Federal capital gains tax is only part of the picture. Most US states tax capital gains as ordinary income (no special rate), some tax them at a preferential rate, and a handful do not tax capital gains at all.

Not reconciling 1099-B against actual basis. Broker-reported basis on your 1099-B is not always correct — brokers can miss wash-sale adjustments, gifted-stock basis, and inherited-stock step-ups. Every sale reported on Form 8949 requires the taxpayer's own basis calculation, not blind acceptance of the 1099-B.

Missing the wash-sale window. Selling for a loss in December and buying back within 30 days (either side of year-end) disallows the loss. Automated tax-loss-harvesting services usually track this, but manual investors routinely trigger inadvertent wash sales that push losses into future years.

Ignoring lot-level cost basis. When you sell part of a position, the default cost basis method is FIFO (first-in-first-out) unless you specify otherwise at the time of sale. Choosing specific-lot identification (selling higher-cost lots first) can meaningfully reduce the reported gain — but you must document the selection at the time of the trade, not after.

Not tracking cryptocurrency basis. Every crypto trade — including swaps between cryptocurrencies and any use of crypto to buy goods or services — is a taxable event with a required basis calculation. Crypto exchanges have historically provided very poor basis reporting; taxpayers are responsible for maintaining their own records.