Capital Gains Tax Calculator 2021 – Forbes Advisor

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You may realize a capital gain or loss when you sell a capital asset, such as real estate, stocks, or bonds. Capital gains and losses are taxed differently from income like wages, interest, rent or royalties, which are taxed at your federal income tax rate (up to 37% for 2022). However, you can only pay up to 20% capital gains tax. And unlike the usual income taxesyour capital gain is generally determined by how long you hold an asset before selling it.

Use our capital gains calculator to determine how much tax you could pay on assets sold.

Calculator Disclaimer: *Calculations are estimates based on the September 2021 tax law. These rates are subject to change. Check out the IRS website for the latest capital gains information.

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Capital Gains Tax Frequently Asked Questions (FAQ)

What is a capital gain or loss?

A capital gain occurs when your fixed asset, such as real estate, stocks, or bonds, increases in value, while a capital loss occurs when the value of the asset decreases. The gain or loss is taxable when the asset is sold.

What is the difference between short-term and long-term capital gains tax rates?

A short-term capital gain is the result of the sale of capital property that you have owned for one year or less. Long-term capital gains are fixed assets that have been held for more than one year. Generally, you pay a higher rate of tax on short-term capital assets compared to long-term ones.

Depending on how long you hold your fixed asset determines the amount of tax you will have to pay. Short-term fixed assets are imposed on your ordinary tax rate up to 37% for 2022. Long-term assets are subject to capital gains tax rates, which are lower. For 2022, the top capital gains tax rate is 20%.

How do you treat capital loss tax on your tax return?

For tax purposes, your capital loss is treated differently from your capital gains. If you sell an asset at a loss, which usually means your selling price is less than its cost when you got the asset, you can claim a loss of up to $3,000 ($1,500 if you’re married separately) on your tax return. The amount reduces your taxable income and reduces the amount you may owe in taxes. If your loss exceeds these limits, you can carry it forward to future tax years.

How to report capital gains or losses on your tax return

You must report your capital gains or losses on Schedule D of your Form 1040 and transfer the amount to report to line 13 of your Form 1040.

Esther L. Steinbach