Understanding Capital Gains Tax
Capital gains tax applies when you sell an asset (stocks, bonds, real estate, etc.) for more than you paid. The tax rate depends primarily on how long you held the asset. Short-term gains (held less than one year) are taxed as ordinary income at your marginal rate, while long-term gains (held one year or more) qualify for preferential rates of 0%, 15%, or 20%.
The Net Investment Income Tax (NIIT)
High-income taxpayers may owe an additional 3.8% Net Investment Income Tax on the lesser of their net investment income or the amount by which their modified AGI exceeds the threshold ($200,000 for single filers, $250,000 for married filing jointly). This surtax was established by the Affordable Care Act and applies to capital gains, dividends, rental income, and other investment income.
Frequently Asked Questions
What qualifies as a long-term capital gain?â–¾
A capital gain is considered long-term if you held the asset for more than one year (at least one year and one day). The holding period starts the day after you acquire the asset and includes the day you sell it.
Can I offset gains with losses?â–¾
Yes. You can use capital losses to offset capital gains dollar for dollar. If your losses exceed your gains, you can deduct up to $3,000 of net capital losses against ordinary income per year, carrying forward any remaining losses to future tax years.
What is the 0% capital gains rate?â–¾
If your total taxable income (including long-term gains) falls within the 0% bracket, you owe no federal tax on those gains. For 2025, single filers pay 0% on long-term gains up to $48,350 of total taxable income. This can be a powerful tax planning opportunity for lower-income years.
Does this calculator handle the wash sale rule?â–¾
This calculator does not account for wash sale rules. If you sell a security at a loss and repurchase the same or substantially identical security within 30 days before or after the sale, the loss is disallowed for tax purposes under the wash sale rule.
Calclypso Editorial Team
Reviewed by certified financial professionals. Last updated: April 2026. Tax rates reflect 2025 IRS figures. This calculator provides estimates only and should not be used as tax advice.