Long-Term Capital Gain Tax Formula:
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Long-term capital gains tax is a tax on profits from the sale of assets held for more than one year. The tax rate is typically lower than ordinary income tax rates to encourage long-term investment.
The calculator uses the simple formula:
Where:
Explanation: The calculator multiplies your capital gain by the tax rate (converted from percentage to decimal) to determine your tax liability.
Details: Understanding your potential tax liability helps with investment planning, timing of asset sales, and estimating after-tax returns.
Tips: Enter your capital gain (sale price minus purchase price and any allowable expenses) and your applicable long-term capital gains tax rate. Both values must be positive numbers.
Q1: What qualifies as a long-term capital gain?
A: Profits from assets held for more than one year before selling qualify for long-term capital gains treatment.
Q2: How do I know my long-term capital gains tax rate?
A: In the U.S., rates typically range from 0% to 20% depending on your taxable income, plus a possible 3.8% net investment income tax for high earners.
Q3: Are there deductions or exemptions?
A: Some exclusions may apply (like for primary home sales), and capital losses can offset gains. Consult a tax professional for your specific situation.
Q4: Does this calculator work for short-term gains?
A: No, this is specifically for long-term gains. Short-term gains (assets held ≤1 year) are taxed as ordinary income.
Q5: Are state taxes included?
A: No, this calculates federal long-term capital gains tax only. Many states also tax capital gains, often at ordinary income tax rates.