What is capital gains tax and how is it calculated?

Capital gains are the profits you make when you sell a stock, real estate or other taxable asset that increased in value while you owned it. The capital gains tax is based on that profit. The long-term capital gains tax rate is typically 0%, 15% or 20%, depending on your tax bracket. You do not have to pay capital gains tax until you’ve sold your investment.

Can capital gains push me into a higher tax bracket?

No – Capital Gains are taxed separately from Ordinary Income. It will not push you into a higher tax bracket (assuming Long-Term Capital Gains). Note: A Short-Term Capital Gain doesn’t qualify for preferential tax treatment and is taxed as Ordinary Income. However, when you realize a Capital Gain, it impacts your adjusted gross income.

What is a capital gain and how is it taxed?

Capital gains are the profits you make when you sell a stock, real estate or other taxable asset that increased in value while you owned it. The capital gains tax is based on that profit. The long-term capital gains tax rate is typically zero, 15 or 20 percent, depending on your tax bracket.