The basics
What is capital gains tax?
Capital gains tax is the tax on the profit when you sell an asset for more than you paid for it. It applies to the gain, not to the sale price and not to the asset itself. Shares, cryptocurrency, a second home, a rental property and a business stake are all capital assets. Nothing is owed while you merely hold something that has risen in value: the tax is triggered by the disposal, which is why it is largely a tax whose timing you choose.
How does capital gains tax work?
Your long-term gain is stacked on top of your other taxable income, not taxed from the bottom of the rate table. Ordinary income fills the lower brackets first and the gain sits above it, so the rate you pay on the gain depends on how much other income is underneath it. One consequence surprises people: a single gain can straddle two bands, with part taxed at 15% and the remainder at 20%. The calculator shows that split rather than averaging it away.
How is capital gains tax calculated?
Start with the amount realised on the sale, net of selling costs, and subtract your adjusted basis — broadly what you paid, plus improvements, less any depreciation claimed. That difference is the gain. Sell for $300,000 what you bought for $100,000 and the tax is computed on the $200,000 gain, not on the $300,000. The gain is then sorted by holding period, stacked on your other income, and charged at whichever rates it reaches.
Rates and amounts
How much is capital gains tax?
For an asset held more than a year, 0%, 15% or 20% federally, decided by your total taxable income rather than by the size of the gain. In 2026 a single filer pays 0% while taxable income stays at or below $49,450, 15% up to $545,500, and 20% above that; filing jointly the two ceilings are $98,900 and $613,700. Held a year or less, the gain is ordinary income taxed at up to 37%. A further 3.8% net investment income tax can apply on top, and most states add their own.
What is the capital gains tax rate?
There is no single rate. Long-term gains use a three-step federal ladder of 0%, 15% and 20%, set by total taxable income. Two special rates sit outside it: collectibles are capped at 28%, and the part of a real-estate gain attributable to depreciation is capped at 25%. Short-term gains use the ordinary rate table, up to 37%. Any of these can carry the additional 3.8% net investment income tax.
What is long term capital gains tax?
It is the tax on a gain from an asset you held for more than one year. Crossing that line moves the gain off the ordinary income table and onto the preferential 0/15/20% ladder. The holding period runs from the day after acquisition to the day of disposal, so more than one year means at least 366 days for most assets — 365 is still short-term.
How much is long term capital gains tax?
0%, 15% or 20% federally in 2026, plus 3.8% if the net investment income tax applies and whatever your state charges. The zero band is genuinely zero, not a deferral: a single filer whose total taxable income stays at or below $49,450 pays no federal tax on a long-term gain at all. The 20% rate only begins above $545,500 single or $613,700 joint, so most filers with a long-term gain land at 15%.
What is short term capital gains tax?
It is the tax on a gain from an asset held one year or less. There is no preferential treatment: the gain is added to your ordinary income and taxed at your marginal rate, up to 37%. This catches active traders, and anyone who sells soon after shares vest or shortly after acquiring an asset they assumed would qualify as long-term.
How much is short term capital gains tax?
Whatever your ordinary marginal rate is — 10%, 12%, 22%, 24%, 32%, 35% or 37% in 2026 — plus 3.8% where the net investment income tax applies, plus state tax. The gap against long-term treatment is the single largest number on most calculations. On the same income and the same gain, selling at 364 days rather than 366 can multiply the tax several times over, and the calculator shows both figures if you change the holding period.
When you pay
When do you pay capital gains tax?
The tax belongs to the year the sale closes, but you rarely pay it in one go the following April. If you expect to owe $1,000 or more after withholding, federal law wants the money in quarterly installments, generally due 15 April, 15 June, 15 September and 15 January. Miss them and an underpayment charge can apply even if you pay in full at filing. The safe harbour is the part worth knowing: pay at least 90% of this year’s tax, or 100% of last year’s — 110% if your prior-year adjusted gross income exceeded $150,000 — and no underpayment penalty applies however large the gain turns out to be.
When do you pay capital gains tax on real estate?
In the tax year the sale closes — the year title transfers, not the year you signed a contract. Because a property sale is usually far larger than anything your payroll withholding anticipated, it is the classic trigger for a quarterly estimated payment: the installment covering the quarter the sale closed in. The federal timing question is separate from closing-table withholding, which several states impose on their own schedule and which this calculator does not model.
Property and real estate
How to avoid capital gains tax on real estate
On a main home the exclusion under IRC section 121 is the large one: $250,000 of gain excluded filing single, $500,000 jointly, if you owned and lived in the property for two of the five years before the sale. The two years need not be continuous. Falling short for a work move, a health reason or another qualifying unforeseen circumstance gives a reduced exclusion rather than none — and that reduction prorates the maximum exclusion, not the gain, which is the step most calculators get wrong. Improvements you paid for also raise your basis and shrink the gain, if you kept the receipts.
How much is capital gains tax on real estate?
It depends on what the property was to you. On a main home, often nothing, because the section 121 exclusion covers the whole gain. On a second home, the ordinary 0/15/20% ladder. On a rental the gain splits: the part matching depreciation you claimed is unrecaptured section 1250 gain taxed at up to 25%, and only the remainder gets the preferential rates. Selling a long-held rental therefore produces a higher bill than the headline rates suggest.
Why do I owe 25% on the sale of a rental property?
Because depreciation you claimed while letting the property reduced your basis, and on sale that portion of the gain is recaptured as unrecaptured section 1250 gain. The 25% is a maximum, not a flat rate — if your ordinary rate is lower, the lower rate applies. The recaptured amount is the lesser of the depreciation taken and the total gain, so it can never exceed what you actually made on the sale.
Reducing what you owe
How to avoid capital gains tax
The gain itself is rarely avoidable, but its rate very often is, because the rate is set by facts you control. Holding past one year moves the gain onto the 0/15/20% ladder. Realising in a low-income year can drop it into the 0% band outright. Splitting a disposal across two tax years keeps each half lower in the stack. Harvesting losses offsets gains dollar for dollar. Watching the net investment income tax threshold can save 3.8% on the whole amount. Each of these is a timing or accounting choice the statute expressly contemplates — none of it is evasion, which is concealing a gain you actually realised.
Can I offset capital gains with capital losses?
Yes, and the netting order is fixed: short-term losses against short-term gains and long-term against long-term first, then any remaining loss of one character offsets the other. If losses still exceed gains, up to $3,000 a year offsets ordinary income for individuals, and anything beyond that carries forward indefinitely. The carryforward does not expire.
Other taxes, states and effective rates
Do I have to pay the 3.8% net investment income tax as well?
Only if your modified adjusted gross income exceeds $200,000 filing single or $250,000 jointly, and then only on the lesser of your net investment income and the amount by which you exceed the threshold. That “lesser of” matters: a taxpayer $10,000 over the threshold with a $400,000 gain pays 3.8% on $10,000, not on $400,000. The thresholds are fixed in statute and have never been indexed for inflation, so they capture more filers each year.
Which states do not tax capital gains?
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas and Wyoming levy no individual income tax on capital gains. Washington is the partial exception: it has no income tax, but does impose a separate 7% excise tax on long-term gains above an annually indexed standard deduction. Every other state either taxes gains as ordinary income or applies a specific rate or subtraction.
What is the effective tax rate on a capital gain?
It depends entirely on what you divide by, and this is where published figures diverge. We state the rate against the gain itself: the extra tax the sale caused, divided by the gain. Dividing the same tax by your total income instead produces a much smaller and much more flattering number that tells you nothing about what the sale cost you. Both figures are shown side by side in one worked example on the home page.
Tax year 2026 figures. Last updated .
If the question is not here
The guides go deeper on each of these, one page per question with a worked example, and the state comparison covers what your state adds on top. Anything the calculator does not model is listed on the methodology page.