2023 Capital gains tax calculator and tax guidance

You receive capital gains when you sell a capital asset, like real estate, stocks, or collectibles, for a profit. The tax rate you pay on capital gains depends on:

• How long you hold the asset

• Your taxable income

• Your filing status

Calculate your expected capital gains tax below and learn more about capital gains and losses, tax rates, and advice to reduce your taxes. 

Our capital gains tax calculator determines your capital gains amount, taxes owed, and tax rate. 

Input the initial value (purchase price plus amount spent on improvements) and sales price (how much the asset sold for) of a single asset to determine its taxes owed, or total the initial values and sales prices of all capital assets sold in 2023 to estimate how much you’ll owe in capital taxes for the entire year.  

Capital gains taxes explained

Capital gains and losses are the difference between your asset’s sale price and its purchase price plus improvement costs. Capital gains are the income you earn when you sell a capital asset, taxed as part of your income.

You pay capital gains taxes for the tax year you sold the asset, and they’re subject to a capital gains tax rate rather than the federal income tax rate. Capital gains tax rates are often lower than income taxes, but ultimately depend on how long you hold the asset.

• Short-term capital gains: Assets held less than a year that are taxed at the short-term capital gains tax rate – equivalent to federal income tax rates. 
• Long-term capital gains: Assets held longer than a year that are taxed at a more favorable rate – either 0%, 15%, or 20% based on taxable income and filing status. 

Calculating capital gains tax

Calculating the capital gains taxes you owe from a single asset is relatively straightforward – if you have the right information. The formula is:

• Capital gains tax = (sales price - initial value) * tax rate

The formula is simple, but there are a few initial steps to determine variables like your specific tax rate and capital asset details. You’ll need to know the:

• Cost basis: The asset’s initial purchase price plus any paid fees, taxes, and investments to improve it. 
• Sales price: The amount an asset sells for after holding. 
• Amount realized: The difference between the cost basis and the price an asset sold for – (sales price - initial value). 
• Holding time: The period of time you owned an asset before it sold. 
• Tax rate: The taxes you owe on a capital asset’s realized amount based on your holding time, tax filing status, and taxable income.

Most of this information involves your financial records, but your tax rate comes from the government and can change yearly. Look at the correct tax rates and taxable income details for the tax year your asset sold for the most accurate rate. 

Current tax rates

Long-term capital gains tax rates are always 0%, 15%, or 20%, but the tax brackets change annually. Your rate is based on your tax filing status and taxable income for the year. Below are the tax rates for assets sold in 2023. 

Tax brackets also vary annually to account for cost of living changes. Short-term capital gains held under one year are subject to the federal income tax rate rather than the specific long-term capital gains rates. 

Tips to reduce your taxes

Long-term capital asset gains benefit from lower tax rates than short-term gains, but that’s not the only way to outsmart your taxes. Explore tips to maximize your investment returns below. 

Hold assets for the long-term

Waiting at least one year and one day to sell your capital assets is the easiest way to reduce your tax liability. Long-term capital asset taxes max out at 20%, while short-term gains rates are as high as 37% in 2023. It also provides more time for your returns to increase. 

Harvest your losses

Capital assets sell for gains or losses, depending on if their value appreciated while you owned them. Losing value in a capital asset isn’t ideal, but you can balance your gains and reduce your capital gains taxes by selling your losses. 

If you sell three capital assets in the same tax year and two had gains of $2,500 each, while the third asset had a capital loss of $3,000, you only owe taxes on the $2,000 difference. 

If you’re paying 20% long-term capital gains taxes, that equals $400 instead of the $1,000 you’d owe if you only sold capital assets with gains. 

Though, this doesn’t work with retirement accounts, since you don’t realize gains in the current year.

Note: Wash-sale rules prevent you from selling assets at a loss and repurchasing them within 30 days for a tax benefit. You can repurchase assets sold at a loss, but you can’t claim the asset on your taxes if you re-purchase it within the 30 days. 

Donate appreciated investments

Donation has been a go-to opportunity for reduced taxes for decades, and it works for capital assets, too. You can donate assets themselves to avoid owing capital gains taxes, and the donation earns you a tax deduction for the year. 

You can also add capital assets to your estate instead of donating them to a nonprofit organization or charity. Your heirs will inherit the gains you accumulated and won’t have to pay taxes on them. Inherited assets receive a step-up in basis that adjusts the cost basis to its current market value instead of the initial purchase value. 

Consult a financial advisor

There are several tools and resources available to help you manage your investments and tax liability, but a qualified financial advisor can dig a little deeper to maximize your portfolio performance and tax advantages. 

Experienced advisors are especially valuable if you’re in a higher tax bracket, managing multiple investments, or have multiple income sources. Fiduciary advisors are responsible for acting in your best interest and have years of experience navigating IRS regulations and changing tax laws.

Manage your tax-advantaged assets with confidence

Understanding how capital gains work is the first step to reducing how much you owe. Once you calculate your capital gains taxes, learn how to manage your assets with an optimized strategy for higher returns and less taxes. 

Looking for more help maintaining your investments? Explore your options for financial freedom today and owe less taxes tomorrow. 

‍