Capital gains tax calculator

The tax is on $15,000, not on $40,000. That difference is basis: what the asset cost you. For shares it is the purchase price plus commission. For property it is the price plus buying costs plus improvements. Every dollar of basis you can document is a dollar the tax never touches.

Basis is also the part that goes missing. Reinvested dividends raise basis on a fund holding, and forgetting them means paying tax twice on the same money: once as income when the dividend was reinvested, once as gain because the basis was recorded too low.

The 15 percent used here is a rate you type in, so the identity works for whatever rate applies to the case: a long term rate, a short term rate that follows income, or a state rate layered on top. Enter the one that fits and the arithmetic is the same.

Holding period is what usually selects it. Assets held past the long term line are normally taxed at a lower rate than assets sold quickly, which can make the same $15,000 gain cost noticeably different amounts. See capital gains tax for the underlying idea and how investments are taxed for the wider picture.

A sale below basis produces a loss instead of a gain, and losses offset gains before any rate is applied. Selling one holding at a $5,000 gain and another at a loss of the same size nets to zero taxable gain, which is the whole idea behind tax loss harvesting.

That is also why the order of sales matters more than most people expect. The tax is computed on the net, so a gain realised in the same year as a loss is a different bill from the same gain realised alone.

This is the gain and rate calculation for a single sale: proceeds, basis, one rate. Netting across many sales, the sale of a main home, and any threshold based surcharge are separate calculations that each start from a gain computed exactly this way. This is educational material, not financial advice.