Capital Gains Tax Calculator
Use our free capital gains tax calculator to estimate your short-term or long-term capital gains tax.
What is Capital Gains Tax?
Capital gains tax is a tax that traders and investors owe when they sell an asset for profit. When a trader buys a stock and sells it for a higher price, they create a taxable event and owe short-term or long-term capital gains tax, depending on how long the position was held.
Long-Term Capital Gains Tax
If an asset is held for over one year, and sold for a profit, then that creates a long-term capital gains taxable event.
However, if your assets are sold within a tax-sheltered account, such as a 401K, Roth IRA, or traditional IRA, then you don't usually owe taxes on the profits, that is, unless you withdraw before retirement age.
Short-Term Capital Gains Tax
If an asset is held for one year or less, but not over one year, and sold for a profit, then that creates a short-term capital gains taxable event.
Stock traders typically have to pay short-term capital gains tax on their trading profits, since traders usually hold the stock for less than a year.
The short-term capital gains tax rates are typically taxed at the same rate as your income tax rate. For example, if you have an income source from a job, that puts you in the 22% federal income tax bracket, then you would likely owe 22% in short-term capital gains tax.
Short-term capital gains taxes are usually always higher than long-term capital gains tax rates. However, it is important to consult a tax professional for help with filing your taxes, and to check your state income tax rate, as it differs per state in the USA.
Some traders will avoid, defer, or delay, paying short-term capital gains taxes by trading stocks within their tax-sheltered accounts. For example, if a trader makes profit by trading stocks in their Roth IRA, they would not owe taxes on those profits when they withdraw money at retirement age.
If a trader isn't trading within a tax-sheltered account, it is important then to account for short-term and long-term capital gains taxes when determining how much profit you need to make per trade to be consistently profitable.
