Capital Gains Calculator California

California Capital Gains Tax Calculator

0% (Long-Term, Low Income) 10% (Ordinary Income) 12% (Ordinary Income) 15% (Long-Term, Mid Income) 20% (Long-Term, High Income) 22% (Ordinary Income) 24% (Ordinary Income) 32% (Ordinary Income) 35% (Ordinary Income) 37% (Ordinary Income) 1% 2% 4% 6% 8% 9.3% 10.3% 11.3% 12.3% 13.3% (Includes 1% Mental Health Surcharge)

Summary of Capital Gains:

Capital Gain (or Loss):

Estimated Federal Capital Gains Tax:

(Includes NIIT of " + formatter.format(niitTax) + ")

Estimated California Capital Gains Tax:

Total Estimated Tax:

Net Profit After Tax:

(No tax due on a capital loss. Consult a tax professional for loss deduction rules.)

Understanding Capital Gains Tax in California

Capital gains tax is levied on the profit you make from selling an asset that has increased in value. This can include real estate, stocks, bonds, and other investments. In California, understanding how these taxes are calculated is crucial for financial planning, as the state has some of the highest income tax rates in the nation, which directly impact capital gains.

What is a Capital Gain?

A capital gain occurs when you sell an asset for more than its adjusted cost basis. The adjusted cost basis is generally the original purchase price plus any costs associated with acquiring the asset (like closing costs) and any significant improvements made to it. The net sale price is the final sale price minus any selling expenses (like realtor commissions or legal fees).

The formula is straightforward:

Capital Gain = (Sale Price - Selling Expenses) - (Purchase Price + Purchase Costs + Improvements)

Short-Term vs. Long-Term Capital Gains

The holding period of an asset is critical in determining how it's taxed at the federal level:

• Short-Term Capital Gains: These are profits from assets held for one year or less. Federally, short-term capital gains are taxed at your ordinary income tax rates.
• Long-Term Capital Gains: These are profits from assets held for more than one year. Federally, long-term capital gains typically receive preferential tax treatment, with rates of 0%, 15%, or 20%, depending on your taxable income.

Important Note for California: California does NOT differentiate between short-term and long-term capital gains. All capital gains are treated as ordinary income and are subject to your marginal California state income tax rate.

Federal Capital Gains Tax Rates

For 2023/2024, the federal long-term capital gains tax rates are:

• 0% Rate: For individuals with taxable income up to $44,625 (single) or $89,250 (married filing jointly).
• 15% Rate: For individuals with taxable income between $44,626 and $492,300 (single) or $89,251 and $553,850 (married filing jointly).
• 20% Rate: For individuals with taxable income above $492,300 (single) or $553,850 (married filing jointly).

If your capital gain is short-term, you would use your ordinary federal income tax bracket (e.g., 10%, 12%, 22%, etc.) for the federal tax calculation.

California Capital Gains Tax Rates

California taxes capital gains as ordinary income. This means your capital gains are added to your other income and taxed at your marginal state income tax rate. California's income tax rates are progressive and can range from 1% to 12.3% (plus an additional 1% mental health services tax on income over $1 million). The exact rate depends on your filing status and taxable income.

Net Investment Income Tax (NIIT)

An additional 3.8% Net Investment Income Tax (NIIT) may apply to certain investment income, including capital gains, for high-income taxpayers. This tax applies to individuals with Modified Adjusted Gross Income (MAGI) above $200,000 (single) or $250,000 (married filing jointly).

How to Use the Calculator

1. Asset Sale Price: Enter the total amount you sold the asset for.
2. Asset Purchase Price: Enter the original amount you paid for the asset.
3. Total Selling Expenses: Include all costs incurred during the sale, such as real estate agent commissions, legal fees, and transfer taxes.
4. Total Purchase Costs & Improvements: Include costs like closing costs when you bought the asset, and any significant capital improvements (e.g., a new roof, major renovation) that add value or prolong the asset's life.
5. Holding Period (Years): Enter the number of years you owned the asset. This helps determine if it's short-term or long-term for federal tax purposes.
6. Estimated Federal Marginal Tax Rate (%): Select your estimated federal marginal tax rate. If your gain is short-term, choose your ordinary income tax bracket. If it's long-term, choose 0%, 15%, or 20% based on your income.
7. Estimated California Marginal Tax Rate (%): Select your estimated California marginal income tax rate. This is the rate at which your capital gains will be taxed by the state.
8. Apply Net Investment Income Tax (3.8%)?: Check this box if your income exceeds the NIIT thresholds ($200,000 single, $250,000 married filing jointly).

The calculator will then provide an estimate of your capital gain, federal tax, California state tax, total estimated tax, and your net profit after taxes.

Example Calculation:

Let's say you sold a rental property in California:

• Asset Sale Price: $700,000
• Asset Purchase Price: $400,000
• Total Selling Expenses: $42,000 (6% commission)
• Total Purchase Costs & Improvements: $30,000 (closing costs + new kitchen)
• Holding Period: 7 years (Long-Term)
• Estimated Federal Marginal Tax Rate: 15% (for long-term capital gains)
• Estimated California Marginal Tax Rate: 9.3%
• NIIT Applicable: No

Calculation:

• Net Sale Price = $700,000 – $42,000 = $658,000
• Adjusted Cost Basis = $400,000 + $30,000 = $430,000
• Capital Gain = $658,000 – $430,000 = $228,000
• Federal Capital Gains Tax = $228,000 * 0.15 = $34,200
• California Capital Gains Tax = $228,000 * 0.093 = $21,204
• Total Estimated Tax = $34,200 + $21,204 = $55,404
• Net Profit After Tax = $228,000 – $55,404 = $172,596

This example demonstrates how the calculator works and the significant impact of both federal and state taxes on your capital gains.

Disclaimer:

This calculator provides estimates for informational purposes only and should not be considered tax advice. Tax laws are complex and can change. Always consult with a qualified tax professional or financial advisor for personalized advice regarding your specific situation.