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Capital Gains Tax Calculator: Put Investments To Work This Tax Season

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When United States stock market prices took a dive at the beginning of COVID-19, millions of people jumped in to take advantage of the low prices, hoping to see some capital gain on each investment. Plenty of investors also sold stock for the first time in 2023. 

Naturally, that’s led to some key income tax questions:

We’ll help with all this and more — and it starts with our free Capital Gains Interactive Calculator. In just one screen, this capital gains tax calculator answers burning questions about your stock sales and gives you an estimate of how much your stock sales will be taxed. The capital gains tax calculator can also help you with your tax planning to find out if you have a capital gain or loss and compare your tax outcome of a short term vs. long term capital gain — whether you already sold or are considering selling your stock. 

Let’s get started!

*Note: Our Capital Gains Interactive Calculator is for estimation purposes only and does not include all investment and stock situations. In most cases, the cost of stock is the amount you pay for it. Costs of stocks sold or acquired through inheritance, gift, ESPP or RSUs use different costing methods that are not covered in our Capital Gains Interactive Calculator.

Gains, Losses, Money, Oh My: Investment Basics for Tax Season

While our free, easy capital gains tax calculator is a great tool to help get you prepared come tax time, it might be useful to understand what goes into capital gains tax, what you’re expected to pay and how much of your investment translates to taxable income.

What Is Taxable Income?

A lot of things count as taxable income, from wages and tips to virtual currency and any money you make from real estate. Other types of income, such as disaster mitigation payments, are nontaxable.  

A capital gain from an investment falls into the former category. The Internal Revenue Service (IRS) treats investments as capital assets, and any money you make from the sale of personal property is generally taxable.

Capital Gain vs. Capital Loss

When investing, you pay a “basis,” which is the cost of the stock or other investment. That’s an important number to hold onto because it helps determine how successful your investment has been overall:

  • Capital gain: When you sell for more than your basis; you made money.
  • Capital loss: When you sell for less than your basis; you lost money.

What’s the biggest difference between a capital gain and a capital loss when it comes to tax season? Simple: A capital gain is generally taxable, while a capital loss may be tax-deductible. For example, if you lose more than you make, you can use up to $3,000 to reduce your overall income like wages and potentially pay less in taxes. If you lose more than $3,000 in a single year, you can carry forward the additional loss to future tax years.

However, if you purchased a stock or other investment and haven’t sold it, you won’t need to worry about any of this just yet. That’s because you’re not required to pay taxes for simply owning an investment. Stock shares will not incur tax implications until they are sold.

Long-Term vs. Short-Term Capital Gain

Let’s say you did all the math and realized you have a capital gain on your hands. Congratulations — your investment has paid off! Now all you have to do is find out how this money will be treated on your income tax return — and to do that, you need to understand how the IRS categorizes capital gains.

  • Long-term capital gain: If you had your investment for more than one year before selling, your capital gain is considered long-term. That means you may be taxed at a lower capital gains rate (0%, 15%, 20%) which can be lower than your tax rate on your ordinary income like wages.
  • Short-term capital gain: Did you sell an investment after holding on to it for one year or less? If so, any capital gains may generally be taxed at the higher ordinary tax rate (10%, 12%, 22%, 24%, 32%, 35%, and 37%).

To make sure you have accurate information, the IRS recommends counting “from the day after the day you acquired the asset up to and including the day you disposed of the asset.”

Understanding Your Investment Tax Rate

By now, you’ve likely determined whether you have a capital gain — and, if so, whether it’s short-term or long-term. The next step is to understand how that information impacts your tax rate.

Short-Term Capital Gain Tax

When your capital gain is considered short-term, you’re taxed based on your ordinary income tax rate. Your ordinary income tax bracket is determined by how much total taxable income you make in a year. That means your short-term capital gain, like the rest of your income, could be taxed between 10% and 37% depending on your income.

Long-term Capital Gain Tax

A long-term capital gain plays by different rules. Instead of falling into your ordinary income tax bracket, the tax rate for these gains is between 0% and 20%. Your income will still determine your tax rate, but the percentage won’t necessarily be the same as your ordinary income tax bracket.

0% Tax Rate

According to the IRS, there are a few situations in which the capital gains tax rate could be 0%:

  • Your taxable income is less than or equal to $44,625 for single and married filing separately.
  • Your taxable income is less than or equal to $89,250 combined for married filing jointly or qualifying surviving spouse.
  • Your taxable income is less than or equal to $59,750 for those filing head of household.

What You’ll Need To Determine Capital Gain Tax

Once you know the basics, it’s time to put our capital gains tax calculator to work. Here’s a checklist to help you find all the right numbers, details and general information before jumping in:

2023 Filing Status

Your filing status determines the rate at which your income is taxed. That means your 2023 filing status is important in estimating your capital gains tax rate for tax year 2023 (the taxes you typically file in 2024).

There are five filing statuses:

  • Single.
  • Married filing jointly.
  • Married filing separately.
  • Head of household.
  • Qualifying widow(er) with dependent child. 

Estimated 2023 Taxable Income

Next, it’s time to estimate the total of your 2023 taxable income. Taxable income is gross income (like wages and salaries) minus adjustments to income (like student loan interest or IRA deductions), standard or itemized deductions and the qualified business income deduction. Include net capital gains. Deduct up to $3,000 in losses. 

If you have your tax documents for 2023, you should be able to find your total taxable income quickly. For a traditional employee, your income can be found on a W2, listed in Box 1. If you expect your income to be the same as a previous year you can find your income on a previous tax return (Form 1040).

If you don’t have any of these forms available, you can estimate your 2023 income on your own. Remember to use your income minus the adjustments and standard or itemized deductions mentioned above.

Total Cost of Investment

This is your basis — the purchase price of your investment. You should keep track of the numbers yourself, but most trading platforms will save the “book value” or “cost value” as part of your portfolio. This specific information can sometimes be transferred between platforms.

Just make sure to add up the total costs for long-term and short-term investments separately, since they are taxed differently.

At tax time, you don’t need to worry about searching for the cost basis — TurboTax Premium can automatically import up to 10,000 stock transactions and 20,000 crypto transactions at once.

Total Proceeds From Sale

Once you’ve found your basis, you’ll need to find the total funds received from a sale. This number, also called your gross cash proceeds, is the amount you received from the sale of the stock and includes any costs and expenses. You should be able to find these numbers in your portfolio,  on your trading platform, or on Form 1099-B in Box 1d.

Time You’ve Owned Your Investment

Finally, you’ll need to know how long you owned your investment before selling it. This is so the calculator can help estimate whether you have a short-term or long-term capital gain or loss and in turn estimate any capital gains tax. This is also helpful for planning purposes if you have not sold your stock yet but you would like to get an estimate of your taxes when comparing selling the investment in under one year or over a year. 

Need Tax Help? We’re Ready To Go

Capital gains tax isn’t always easy. That’s especially true if you have multiple sources of income to juggle or are taking self-employed taxes into consideration, because all of these things can change your tax situation, how much you can deduct and more.

But making money shouldn’t cost you tons of money, right?

The key is to make tax time easy. TurboTax Premium will guide you through your investment transactions, automatically import up to 10,000 stock and up to 20,000 crypto transactions at once and help figure out your gains vs. losses. TurboTax will help surface and guide customers to use any unrealized capital losses they may have from prior years, improving their tax outcome and lowering taxes owed.

Better yet, you can connect to a TurboTax Live Full Service tax expert who specializes in investments to get help along the way or you can have them fully prepare your taxes in one meeting. TurboTax Live tax experts are available in English and Spanish and have an average of 12 years of experience.

Whether you have a capital gain and want to pay the proper taxes or experienced a capital loss and hope to get a helpful deduction, we can put your investments to work.

Lisa Greene-Lewis

Lisa has over 20 years of experience in tax preparation. Her success is attributed to being able to interpret tax laws and help clients better understand them. She has held positions as a public auditor, controller, and operations manager. Lisa has appeared on the Steve Harvey Show, the Ellen Show, and major news broadcast to break down tax laws and help taxpayers understand what tax laws mean to them. For Lisa, getting timely and accurate information out to taxpayers to help them keep more of their money is paramount. More from Lisa Greene-Lewis

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