Capital Gains Tax Calculator

Key Terms

Capital gain

This is the profit you make when you sell an asset for more than your adjusted basis (typically your purchase price plus improvements, minus depreciation).

Holding period

This is how long you owned an asset before selling it, which determines whether your gain is treated as short-term or long-term for tax purposes.

Tax rate

This is the percentage of your capital gain you’ll owe in taxes, which varies based on your income level and how long you held the asset.

What are capital gains taxes?

Capital gains taxes are the taxes you pay on the profit from selling an asset that has gone up in value. The tax rate depends on two main factors: how long you owned the asset and your taxable income. For business owners, capital gains can come from selling business equipment, real estate, stocks, or even selling the business itself. The IRS distinguishes between short-term capital gains (assets held for one year or less) and long-term capital gains (assets held for more than one year), with long-term gains generally receiving more favorable tax treatment.

Who pays capital gains taxes?

Any individual or business entity that sells an asset for a profit must report capital gains to the IRS. This includes sole proprietors, partnerships, corporations and LLCs. However, the specific tax treatment varies depending on your business structure. For example, C corporations realize capital gains at the federal corporate tax rate of 21 percent as of 2025, while pass-through entities like S corporations and LLCs typically pass the gain through to owners, who report it on their individual tax returns.

What factors affect capital gains taxes?

Your capital gains tax rate isn’t one-size-fits-all; several factors influence how much you’ll owe. The most important include:

• How long you held the asset: Your holding period determines whether the gain is taxed as short-term or long-term. According to the IRS, assets held for more than one year qualify for long-term capital gains rates of 0 percent, 15 percent or 20 percent for 2025, depending on your income level. Short-term gains are taxed as ordinary income, which can be as high as 37 percent for high earners.
• Your filing status and taxable income: Your long-term capital gains rate depends on how you file and how much you earn. Here’s how it breaks down as of 2025, according to the IRS:
  • Single filers: 0 percent up to $48,350; 15 percent up to $533,400; 20 percent above $533,400
  • Married filing jointly: 0 percent up to $96,700; 15 percent up to $600,050; 20 percent above $600,050
• Additional taxes for high earners (NIIT): The 3.8 percent Net Investment Income Tax (NIIT) may apply if your modified adjusted gross income exceeds $200,000 as a single filer or $250,000 for married couples filing jointly. This tax applies to investment income, including capital gains, dividends and rental income.
• State taxes: State income tax can significantly increase your total tax bill. Some states, like California, tax capital gains as high as 13.3 percent, while states such as Florida, Texas and Nevada have no state income tax at all.

Are there strategies to reduce capital gains taxes?

Yes. There are several smart, legal ways to reduce or defer capital gains taxes, depending on the type of asset you’re selling and your long-term financial goals. Here are some common strategies business owners and investors use:

• Use tax-loss harvesting to offset gains: If you have losing investments, you can sell them to offset gains from profitable sales. The IRS lets you deduct up to $3,000 in net capital losses against ordinary income each year, and you can carry forward any extra losses to future tax years. This can be especially helpful when rebalancing your portfolio or closing out underperforming business ventures.
• Defer taxes on real estate with a 1031 exchange: Real estate investors can use a 1031 like-kind exchange to defer capital gains taxes by reinvesting the proceeds from a property sale into another qualifying property. You have 45 days to identify the new property and 180 days to complete the purchase. Many investors repeat this strategy over the years, sometimes deferring taxes until retirement when they may be in a lower tax bracket.
• Explore Opportunity Zone investments: Investing gains into a designated Opportunity Zone can offer major tax advantages. If you hold the new investment for at least 10 years, you may be able to eliminate capital gains tax on the new investment’s growth. This strategy is typically used by investors looking for long-term tax planning and community development benefits.
• Consider the QSBS exclusion when selling a business: Small business owners may qualify for the Section 1202 Qualified Small Business Stock (QSBS) exclusion, which can eliminate up to 100 percent of federal capital gains tax on qualified stock held for more than five years. To qualify, the business must be a C corporation with gross assets of $50 million or less when the stock was issued. This benefit can be significant for founders planning an exit strategy.
• Look at tax-advantaged retirement accounts: Contributing appreciated assets to accounts like a 401(k) plan or Roth IRA can help reduce your immediate tax burden while also growing retirement savings. This is a longer-term planning approach, but it can offer meaningful advantages over time.
• Consider the timing: Note that timing matters. If you expect to be in a lower tax bracket next year due to reduced income or retirement, waiting to sell could lower your tax bill. On the flip side, if tax rates are expected to rise, selling sooner may make more sense.

Because these strategies can be complex and have specific rules and timelines, it’s wise to consult a tax consultant or financial professional before making a move.