Calculations of the Capital Gain Tax on Sale of Property

Capital gain is the profits you earn from the sales of assets like land, house, bonds, jewelry, precious metals, real estate, and stock shares. When individuals and corporations sell these assets, the government demands tax based on the growth of investment value called capital gain tax.

Keep in mind that these taxes do not apply to unsold assets. If you are a landowner and looking to sell your land or home, you are also liable to pay capital gain tax on the profit you earned from the sale.

This gain tax depends on various factors like marriage status, short-term and long-term investments depending on the years you spend in the property, and your yearly income, etc.

Keep reading the article, and we will tell you what long-term and short-term capital gain tax is. Furthermore, we will explain how to calculate capital gain taxes in different circumstances. 

Difference between short-term and long-term capital gain

It depends on how long you owned the assets before you sold them. Based on these years, it is divided into two categories.

Short-term capital gain tax

It occurs when you sell your property within one year after purchase. These gains are taxed just like an ordinary income tax. You can check the income tax statements of your country and easily calculate the gain tax on your sale profit.

Long-term capital gain tax

Long-term capital taxes are deprived when you hold assets for more than a year. These taxes depend on graduated thresholds of taxable income at 0%, 15%, and 20%. Most of the taxpayers report their long-term tax gain is lower than 15%.

Long term capital gain tax calculation

Long-term capital gain taxes calculations are further categorized into three cases:

Single filler

If you are a single tax filer and your income is less than $40,400/year, you have to pay zero gain tax over the property sale.

However, if your yearly income is more significant than $40,400 but lesser than $445,850 in a year, you will pay 15% profit to the government over the property sale. Besides, if your income is higher than $445,851/year, your gain tax will be 20%.

Married filler

If you are a married person, the government provides some flexibility in the taxes regarding your responsibilities. You don’t have to pay any tax if your income is less than $80,800/year.

However, if your income is greater than $80,800 and lesser than $501,600, the government will charge you 15% tax. Nevertheless, if your income exceeds $10,601, you have to pay 20% capital gain tax.

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Head of household

The government will charge capital gain tax differently if you are a head of household. Your gain tax will be 0% for income less than $54,100.

However, you have to pay 15% tax on sale profit, if your yearly income falls between $54,101 and $473,450. Furthermore, if you earn more than $473,451 yearly, you have to pay 20% capital gain tax.

Note: Short-term capital tax gain will be calculated just like ordinary income tax.

What happens if you have both capital gain and capital losses?

For this purpose, you must evaluate short-term and long-term transactions first. Then, sum all the short-term and long-term gains separately. If the overall result is positive, consider each transaction individually depending on the above tax rates.

If both taxes are negative, you have to pay zero tax. In comparison, if one of the long-term or short-term tax is positive while the other is negative, subtract negative from the positive and evaluate gain tax on the remaining amount. 

Bottom line

Capital gain tax is the amount you pay to the government based on the profit you earned from selling the property. Its calculation is based on several criteria that we have thoroughly discussed above in the article. Go and read the above section to calculate yourself now!

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