What is the difference between short-term and long-term capital gains?

Short-term capital gains apply to assets held for one year or less and are taxed at your ordinary income rate (the same as wages, up to 39.6%). Long-term capital gains apply to assets held for more than one year and are taxed at preferential rates of 0%, 15%, or 20%, depending on your total income. The 1-year threshold is measured from the day after acquisition to the sale date — crossing it can dramatically lower your tax bill.

What are the 2026 long-term capital gains tax rates?

For 2026 (post-TCJA sunset), the long-term capital gains rates are 0%, 15%, and 20%. For single filers, the 0% rate applies to income up to $48,000, the 15% rate covers $48,001–$533,000, and the 20% rate applies above $533,000. For married filing jointly, the thresholds are $96,000 and $600,000. These brackets are stacked on top of your ordinary income, so your ordinary income determines which LTCG bracket your gains fall into.

What is the Net Investment Income Tax (NIIT)?

The Net Investment Income Tax is a 3.8% surtax on investment income (including capital gains, dividends, interest, and rental income) that applies to high earners. It kicks in when your modified adjusted gross income (MAGI) exceeds $200,000 (single) or $250,000 (married filing jointly). The NIIT applies to the lesser of your total investment income or the amount by which MAGI exceeds the threshold. It stacks on top of the regular capital gains tax.

How is capital gains tax calculated?

Capital gains tax is calculated by first determining your gain (sale price minus cost basis), then classifying it as short-term (held ≤ 1 year) or long-term (held > 1 year). Short-term gains are added to your ordinary income and taxed at your marginal rate. Long-term gains are stacked on top of your ordinary income and taxed at 0/15/20% based on LTCG brackets. Finally, the 3.8% NIIT may apply if your MAGI exceeds the threshold.

How can I minimize my capital gains tax?

The most effective strategies are: (1) Hold assets for more than 1 year to qualify for long-term rates. (2) Tax-loss harvesting — sell losing positions to offset gains (up to $3,000 of excess losses can offset ordinary income annually). (3) Time sales in low-income years to access the 0% LTCG bracket. (4) Use tax-advantaged accounts (401k, IRA) for investments that generate frequent gains. (5) Consider charitable giving of appreciated stock to avoid capital gains tax entirely.

What is cost basis and how is it determined?

Cost basis is the original purchase price of an asset plus any acquisition costs (commissions, fees). It's the benchmark against which your gain or loss is measured. Cost basis can be adjusted for stock splits, reinvested dividends, and certain corporate actions. For inherited assets, the basis is typically 'stepped up' to the fair market value at the date of death, eliminating capital gains tax on lifetime appreciation. For gifted assets, the donor's basis carries over.

Can I offset capital gains with capital losses?

Yes. Capital losses offset capital gains of the same type first (short-term losses offset short-term gains, long-term losses offset long-term gains), then cross-apply to the other type. If total losses exceed total gains, you can deduct up to $3,000 of the excess against ordinary income per year ($1,500 married filing separately). Unused losses carry forward indefinitely to future years. This makes tax-loss harvesting a valuable strategy.

Does this calculator include state capital gains tax?

No. This calculator estimates federal capital gains tax only (short-term, long-term, and NIIT). Most states also tax capital gains, typically as ordinary income, but rates and treatment vary widely. Some states (Texas, Florida, Washington) have no state income tax, while California taxes capital gains at ordinary rates up to 13.3%. Check your state's tax rules for a complete picture of your total capital gains tax burden.

Capital Gains Tax Calculator

A capital gains tax calculator is a free online tool that estimates the federal tax on your investment sale, including short-term rates, long-term preferential rates, and the 3.8% NIIT. It shows your total tax, effective rate, and net proceeds. Free, no sign-up required.

Investment Sale Details

Cost Basis?Enter your cost basis.

Sale Price?The price you sold the asset for.

Holding Period?How many years you plan to own the home before selling it.

Ordinary Taxable Income?Enter your ordinary taxable income.

Filing Status

End of inputs

Your Capital Gains Tax Estimate

Capital Gain

$50,000.00

Long-term

Total Tax

$7,500.00

ST + LT + NIIT

Short-Term Tax

$0.00

Ordinary rates

Long-Term Tax

$7,500.00

0/15/20% rates

NIIT

$0.00

3.8% surtax

Net Proceeds

$92,500.00

After tax

Effective Rate

15.00%

Total tax ÷ gain

Marginal LTCG Rate

15.00%

Top LTCG bracket

Cost basis: $50,000.00. Sale price: $100,000.00. Gain: $50,000.00 (Long-term). Holding period: 18 months. Ordinary income: $95,000.00. Filing status: Single. Short-term tax: $0.00. Long-term tax: $7,500.00. NIIT: $0.00. Total tax: $7,500.00 (15.00% effective). Net proceeds: $92,500.00.

Where Your Sale Proceeds Go

Key Insights

Your $50,000.00 gain is classified as long-term because you held the asset for 18 months (more than 1 year). Long-term gains are taxed at preferential rates of 0%, 15%, or 20% — significantly lower than ordinary income rates. This saves you money compared to selling before the 1-year mark.

You held the asset for 18 months — just past the 1-year threshold that unlocks long-term rates. This timing saved you from the higher short-term (ordinary) rates. In the future, consider holding well past 12 months to avoid edge cases near the cutoff, and note that the holding period is measured from the day after acquisition to the sale date.

Your long-term gains are taxed at the 15% rate — the most common LTCG bracket for middle-to-upper income filers. On a $50,000.00 gain, the long-term portion of your tax is $7,500.00. This 15% rate is well below the ordinary income rates (up to 39.6%), which is why holding assets over 1 year is so valuable.

Your total capital gains tax of $7,500.00 is 15.00% of your $50,000.00 gain — a moderate burden. This is typical when the 15% long-term rate applies. You keep $92,500.00 after tax from the sale. Holding assets longer than 1 year is the key reason this rate stays below ordinary income rates.

The Net Investment Income Tax (NIIT) does not apply because your modified adjusted gross income is below the threshold ($200,000 for single, $250,000 for married filing jointly). You avoid the additional 3.8% surtax on investment income. High earners should plan sales carefully, as a large gain can push MAGI over the threshold and trigger the NIIT.

Guide

How to Use This Calculator

1Enter the Cost Basis — the original purchase price of the asset plus any acquisition costs (commissions, fees).
2Enter the Sale Price — the amount you received (or expect to receive) from selling the asset.
3Set the Holding Period in months — the time from acquisition to sale. Over 12 months qualifies as long-term; 12 or fewer is short-term.
4Enter your Ordinary Taxable Income — your non-gain income (wages, interest, etc.) for the year, which determines your LTCG bracket.
5Select your Filing Status (Single or Married Filing Jointly) — this affects the bracket thresholds.
6Review the Capital Gain metric, which shows the realized gain (sale price − cost basis) and whether it's long-term or short-term.
7Check the Total Tax metric, which combines short-term tax, long-term tax, and NIIT into one figure.
8Examine the Effective Rate and Marginal LTCG Rate to understand how much of your gain goes to tax.
9Read the AI insights for personalized guidance on your gain type, tax burden, LTCG rate tier, NIIT impact, and holding period.
10Adjust inputs to compare scenarios — try shortening the holding period to see how short-term rates increase the tax.

Formula

How It's Calculated

Capital gains tax:

  gain = salePrice − costBasis
  isLongTerm = holdingPeriodMonths > 12

  Short-term gains (held ≤ 1 year):
    Taxed at ordinary marginal income rate (up to 39.6%).

  Long-term gains (held > 1 year):
    Taxed at 0% / 15% / 20% based on total income (stacked on ordinary):
      Single:        0% ≤ $48,000 | 15% ≤ $533,000 | 20% above
      Married Joint: 0% ≤ $96,000 | 15% ≤ $600,000 | 20% above

  NIIT (Net Investment Income Tax):
    3.8% on the lesser of investment income or MAGI over threshold.
    Threshold: $200,000 (single) / $250,000 (married filing jointly).

  totalTax = shortTermTax + longTermTax + niit
  effectiveRate = totalTax / gain
  netProceeds = salePrice − totalTax

Example: $50,000 cost basis, $100,000 sale price, 18-month holding
(long-term), single, $95,000 ordinary income.
  gain = $100,000 − $50,000 = $50,000
  Long-term gains stacked on $95,000 ordinary income → 15% bracket.
  longTermTax = 15% × $50,000 = $7,500
  MAGI = $95,000 + $50,000 = $145,000 < $200,000 → NIIT = $0
  totalTax = $7,500. effectiveRate = 15.00%.
  netProceeds = $100,000 − $7,500 = $92,500.

Example: Same sale but held only 8 months (short-term).
  shortTermTax = ordinary marginal rate (25%) × $50,000 = $12,500
  totalTax = $12,500. effectiveRate = 25.00%.
  Holding 5 months longer (past 12) saves $5,000 in tax.

Glossary

Key Terms

FAQ

Frequently Asked Questions

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