How capital gains and losses are calculated
A capital gain or loss generally starts with amount realized minus adjusted basis. This calculator defines amount realized as sales proceeds minus entered selling expenses, then subtracts adjusted cost basis without limiting a negative result to zero.
Each transaction is calculated independently before its signed result enters the selected short-term or long-term category. Qualified dividends are not transactions and never enter this netting step.
Adjusted basis, sales proceeds, and selling expenses
Sales proceeds are entered before the separately listed selling costs. Commissions and other allowable selling expenses reduce amount realized in this model, even when they exceed proceeds.
Adjusted basis must already reflect any required tax adjustments. Broker basis can differ from taxable basis, and this tool does not construct inherited, gifted, wash-sale, or depreciation adjustments.
Short-term versus long-term capital gains
For ordinary capital assets, property held for one year or less is generally short-term; property held for more than one year is generally long-term. Count from the day after acquisition and include the sale date. Exactly one year is short-term. The optional planner shows the day after the one-year calendar anniversary as the earliest standard long-term sale date.
Manual transactions keep their selected classification. The planner uses dates for one separate asset and does not cover inherited property, gifts, wash-sale holding-period adjustments, short sales, options, straddles, or certain partnership interests. Check the applicable rules for those cases.
How the sale-date comparison works
The planner adds the asset once to the existing transactions for each date. Both scenarios keep the same proceeds, basis, selling expenses, filing status, ordinary taxable income, other transactions, carryovers, qualified dividends, and entered NIIT totals. It does not predict investment returns or a later sale price.
The result compares each full federal calculation against the same existing portfolio. Short-term gain flows through the ordinary-income brackets; eligible net long-term gain shares preferential ranges with qualified dividends. Losses and carryovers may change the difference. Optional NIIT uses the entered total MAGI and NII unchanged, so the planner does not infer a sale-specific NIIT change.
If the later date falls outside supported 2026, the figures are illustrative under 2026 rules. Future brackets, capital-gain thresholds, income, deductions, losses, dividends, and tax law may differ.
A calculation-backed 2026 example
Suppose an ordinary asset was acquired on 2025-05-15, with proposed sale on 2026-05-15 and the first standard long-term date on 2026-05-16. With $20,000.00 proceeds, $10,000.00 adjusted basis, and $60,000.00 other ordinary taxable income, the modeled gain is $10,000.00 in either scenario.
The shared tax engine calculates $2,200.00 of incremental federal tax for the proposed sale and $1,500.00 for the later sale. Later minus proposed is -$700.00 under the same 2026 context. This isolates tax treatment and assumes no change in asset price or other tax inputs.
Why short-term gains are taxed as ordinary income
After loss netting, final net short-term capital gain is added to ordinary taxable income. TaxArith then uses its shared 2026 progressive federal brackets rather than applying a flat capital-gains percentage.
The tax impact is the difference between two full federal calculations, so it can reflect movement through more than one ordinary bracket.
How the 0%, 15%, and 20% long-term rates work
Eligible ordinary net long-term capital gain can fall in 0%, 15%, and 20% ranges. Not every taxpayer receives a 15% rate, and one gain can be divided among two or all three ranges.
The displayed bar isolates the final net long-term gain across these ranges. Special 28% gain and unrecaptured Section 1250 gain are outside the model.
Why capital gains are stacked on top of ordinary taxable income
The preferential thresholds refer to total taxable income. Ordinary taxable income occupies the lower stack first, leaving only the unused threshold space for qualified dividends and net long-term gain.
A taxpayer can therefore have long-term gain at 15% or 20% even though the gain itself is smaller than a published threshold.
How qualified dividends affect the same rate brackets
Qualified dividends share the preferential 0%, 15%, and 20% stack. For the isolated gain allocation, the submitted qualified dividends occupy available preferential ranges before the entered net long-term gain.
They are included in both baseline and activity scenarios, so they are not counted again as transaction gain. Ordinary dividends should not be entered in the qualified-dividend field.
How short-term and long-term gains and losses are netted
Current short-term gains first offset current short-term losses, and current long-term gains first offset current long-term losses. Entered loss carryovers are then applied within their character before opposite-signed category results offset each other.
The remaining positive result retains the character of the larger gain category. If combined losses remain, the calculator reports a net capital loss instead of turning its absolute value into a gain.
How capital loss carryovers affect the calculation
Short-term and long-term carryovers from a previous filed return retain tax significance. Enter them as positive amounts; the calculation subtracts each as a loss in its own category before cross-netting.
Do not enter one carryover in both fields. TaxArith does not verify the Schedule D Capital Loss Carryover Worksheet or establish an exact future character split.
The $3,000 capital-loss deduction
For Single, Married Filing Jointly, and Head of Household in this model, a remaining net capital loss can reduce ordinary taxable income by up to $3,000. The deduction cannot exceed the net loss or entered ordinary taxable income.
This is a deduction against income, not a $3,000 tax credit, and the model never reduces ordinary taxable income below zero.
The $1,500 limit for Married Filing Separately
Married Filing Separately uses a $1,500 capital-loss deduction limit instead of $3,000. The same constraints based on remaining loss and available ordinary taxable income still apply.
The filing status in the submitted snapshot controls both this limit and the applicable regular and preferential income-tax thresholds.
What happens to an unused capital loss
Net capital loss that is not used as the modeled current-year deduction appears as an estimated unused loss. Capital losses may carry forward, but the amount and character for a filed return require the official worksheet.
The estimate does not promise the exact short-term or long-term carryforward available in a future year.
Capital-gains tax versus Net Investment Income Tax
Regular federal income tax applies ordinary or preferential treatment within the income-tax calculation. NIIT is a separate 3.8% tax that can apply when an individual has net investment income and MAGI above the statutory threshold.
NIIT does not replace ordinary or capital-gains income tax. The combined display adds the entered NIIT estimate to the federal income-tax impact without claiming that all NIIT was caused by the listed transactions.
How the 3.8% NIIT calculation works
The simplified NIIT base is the smaller of entered total net investment income and MAGI above the filing-status threshold. MAGI exactly at or below the threshold produces zero excess.
The thresholds are $200,000 for Single and Head of Household, $250,000 for Married Filing Jointly, and $125,000 for Married Filing Separately. They are statutory amounts rather than annually indexed thresholds.
Why your broker gain may differ from your taxable gain
A broker statement may omit or report basis differently, while tax basis can require adjustments for wash sales, gifts, inheritance, corporate actions, reinvestments, depreciation, or other facts.
Enter an adjusted basis you have determined outside this calculator and reconcile the result with Forms 1099-B, 8949, and other records as applicable.
Transactions this calculator does not support
The tool excludes collectibles, Section 1202 stock, unrecaptured Section 1250 gain, Sections 1231/1245/1250 business property, depreciation recapture, wash sales, straddles, options-specific adjustments, installment sales, and mark-to-market elections.
It also excludes the home-sale exclusion, opportunity zones, inherited and gifted dual-basis calculations, tax-lot selection, foreign tax, AMT, kiddie tax, and state or local tax.
Schedule D and Form 8949
Most capital transactions are reported on Form 8949 and summarized on Schedule D under rules that can require adjustment codes, broker reconciliation, and special worksheets. This calculator provides an aggregate planning estimate only.
It does not prepare Schedule D, Form 8949, Form 8960, or a federal return, and it does not support nonresident aliens, trusts, or estates.
Official 2026 data and update status
The 2026 long-term capital-gains thresholds were verified on September 20, 2026 using IRS Revenue Procedure 2025-32 as published in Internal Revenue Bulletin 2025-45. Holding period, gain, loss, carryover, qualified dividend, and NIIT rules were reviewed against IRS Topic No. 409, Publications 550 and 505, Instructions for Schedule D and Form 8949, IRS NIIT guidance, and Instructions for Form 8960.
The federal tax result is still an estimate: actual tax may differ because of other income, deductions, credits, elections, tax-table rounding, and special rules outside the submitted model.