How to calculate capital gains tax
At a glance
The first step in how to calculate long-term capital gains tax is generally to find the difference between what you paid for your asset or property and how much you sold it for — adjusting for commissions or fees. Depending on your income level, and how long you held the asset, your capital gain will be taxed federally between 0% to 37%.
When you sell capital assets like mutual funds or stocks there’s a tax implication. But knowing what tax rate applies depends on several factors. In this post, we’ll outline capital gains taxes and how to calculate them.
What is capital gains tax?
The definition is pretty simple: It’s the difference between what you paid for a capital asset (like bonds, mutual funds, real property, or stocks) and what you sold it for. If you sell your asset for more than you bought it, you’ll have a capital gain – If the opposite is true and you sell the asset for less than you bought it, you’ll have a capital loss.
Capital gains tax is the taxation of capital assets. The taxation is classified by the length in which you own the asset, which we’ll describe in detail below!
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How to calculate capital gains tax — step-by-step
The basics of a capital gain calculation is to find the difference between what you paid for your asset or property and what you sold it for. Let’s take it step-by-step and find out the answer to “How does capital gains tax work?”
Capital gain calculation in four steps
- Determine your basis. This is generally the purchase price plus any commissions or fees paid. Basis may also be increased by reinvested dividends on stocks and other factors.
- Determine your realized amount. This is the sale price minus any commissions or fees paid.
- Subtract your basis (what you paid) from the realized amount (how much you sold it for) to determine the difference.
- If you sold your assets for more than you paid, you have a capital gain.
- If you sold your assets for less than you paid, you have a capital loss. Learn how you can use capital losses to offset capital gains tax.
- Review the descriptions in the section below to know which tax rate may apply to your capital gains.
Looking for a capital gains tax calculator? When you file with H&R Block Premium, there’s a capital gains tax calculator built right in. Once you’ve added the information about your asset, you’ll see a results page that outlines your total gain or loss. Of course, you could also get help from our tax pros when you file.
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Capital gains tax rates: Short vs. long
At this point, you may know that you have a gain (or a loss). But you may also be wondering how much is capital gains tax? Well, that will depend on if it’s a short- or long-term capital gain. Here, we’ll outline the differences.
Short-term capital gain tax rates
Short-term capital gains are gains apply to assets or property you held for one year or less. They are subject to ordinary income tax rates meaning they’re taxed federally at either 10%, 12%, 22%, 24%, 32%, 35%, or 37%.
Long-term capital gains tax rate
Long-term capital gains apply to assets that you held for over one year and are taxed differently. The federal tax rate for your long-term capital gains depends on where your income falls in relation to three cut-off points.
2023 long-term capital gains tax rates, by filing status
| Tax filing status | 0% tax rate | 15% tax rate | 20% tax rate |
| Single | Up to $44,625 | $44,626 to $492,300 | $492,301 and up |
| Married filing separately | Up to $44,625 | $44,626 to $276,900 | $276,901 and up |
| Head of household | Up to $59,750 | $59,751 to $523,050 | $523,051 and up |
| Married filing jointly | Up to $89,250 | $89,251 to $553,850 | $553,851 and up |
2024 long-term capital-gains rates, by filing status
| Tax filing status | 0% tax rate | 15% tax rate | 20% tax rate |
| Single | Up to $47,025 | $47,026 to $518,900 | $518,901 and up |
| Married filing separately | Up to $47,025 | $47,026 to $291,850 | $291,851 and up |
| Head of household | Up to $63,000 | $63,001 to $551,350 | $551,351 and up |
| Married filing jointly | Up to $94,050 | $94,051 to $583,750 | $583,751 and up |
Source: IRS
Note: Gains on the sale of collectibles (rental real estate income, collectibles, antiques, works of art, and stamps) are taxed at a maximum rate of 28%.
More help with capital gains calculations and tax rates
In most cases, you’ll use your purchase and sale information to complete Form 8949 so you can report your gains and losses on Schedule D.
If you still have looming questions like, “How much is capital gains tax for a specific capital asset I sold this year?” or “What is tax loss harvesting?” let H&R Block help. Our tax pros know the ins and outs of taxes and are dedicated to making sure you’ve filed with accuracy, so you get the biggest refund possible – guaranteed.
Make an appointment with one of our tax pros today.
Or if you prefer to file on your own, H&R Block Premium can help you file your taxes and calculate your capital gains taxes.
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