Question

Can You Tell Me How to Calculate Capital Gains Tax?

Answer

The first step in how to calculate long-term capital gains tax is generally to find the difference between what you paid for your property and how much you sold it for—adjusting for commissions or fees. Depending on your income level, your capital gain will be taxed federally at either 0%, 15% or 20%.

How to Figure Long-Term Capital Gains Tax

Let’s take a closer look at the details for calculating long-term capital gains tax. Keep in mind, the capital gain rates mentioned above are for assets held for more than one year. If you realize a profit on assets held one year or less (short-term capital gain), these will be taxed as ordinary income. Also, gains on some types of sales, such as rental real estate and collectibles, may be taxed at different rates.

  1. 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.
  2. Determine your realized amount. This is the sale price minus any commissions or fees paid.
  3. 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.
  4. Review the list below to know which tax rate to apply to your capital gains.

Determine Your Long-Term Capital Gains Rate

The federal tax rate for your long-term capital gains are taxed depends on where your income falls in relation to three cut-off points.

2017 Long-Term Capital Gain Rates

  • 0% if your income is below $37,950 and you are filing as single (or below $75,900 for married filing jointly)
  • 15% if your income is between $37,951 and $418,400 and you are filing as single (or between $75,901 and $470,700 for married filing jointly)
  • 20% if your income is over $418,400 and you are filing as single (or over $470,700 for married filing jointly)

2018 Long-Term Capital Gain Rates

  • 0% if your income is below $38,700 and you are filing as single (or over $77,400 for married filing jointly)
  • 15% if your income is between $38,701 and $500,000 you are filing as single (or between $77,401 and $600,000 for married filing jointly)
  • 20% if your income is over $500,000 and you are filing as single (or over $600,000 for married filing jointly)

Capital Gains Tax, Form 8949 and Schedule D

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. See Schedule D instructions for more information.

Have additional questions about how to calculate capital gains tax? Our Tax Pros know the ins and outs of taxes and are dedicated to helping you better understand your return.

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