Capital Gains Tax

Capital Gains Tax

How do I determine my capital gain (or loss)?


Sale Price – Seller Closing Costs = Amount Realized

Amount Realized – Adjusted Basis = Gain or Loss

Primary Residence can’t take losses for tax purposes, however investment property can. Losses are deductible from gross income. Homeowners have a capital gains exemption that can exclude up to $500,000 of capital gains. Investment Property owners have 1031 Exchanges that can defer capital gains until sometime in the future.

Short Term vs. Long Term Capital Gains

Short Term Long-Term
Held less than 1 year Held longer than 1 year

Short Term Capital Gains are taxed at your Federal Ordinary income tax rate.

Long Term Capital Gains Tax is lower than ordinary income tax. The government from time to time has changed the Long-Term Capital Gains tax rate. In 2013, the capital gains tax rate maximum is 20% which is half the ordinary income tax maximum.

Federal Capital Gains Tax 2013

Tax Bracket Long-Term Capital Gains Tax Rate
10%-15% 0%
25%-35% 15%
39.6% 20%
Single Federal Tax Bracket 2014

Single Federal Tax Bracket 2014

Married Filing Jointly Federal Tax Bracket

Married Filing Jointly Federal Tax Bracket

Starting January 1, 2014, the Medicare tax went into effect. It affects higher-income earners. If you make $200,000 as a single person or $250,000 as a couple then the 3.8% Medicare Tax will be added whether the Capital gain is long-term or short term.

Unfortunately California has the highest Capital Gains taxes in the nation.

california state tax


California does not have a preferential tax rate for Capital Gains. Capital Gains are taxed the states ordinary income rate. The Maximum tax is 13.3%.

20% + 3.8% + 13.3% = 37.1% Maximum Capital Gains Tax Rate

15% + 10.3% = 25.3% Capital Gains Tax Rate for $180,000 income earner

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