Capital Gains Tax Calculator: How Much Can I Save?

Use the calculator to understand possible tax savings.

What is your State Capital Gain Rate? %
1. Calculate Net Adjusted Basis:
  Original Purchase Price $
    plus Improvements +$
    minus Depreciation -$
  = NET ADJUSTED BASIS =$


2. Calculate Capital Gain Sales Price of Property:
  Sales Price $
    minus Net Adjusted Basis -$
    minus Costs of Sale -$
  = Capital Gain =$

3. Calculate Capital Gain Tax Due:
    Recaptured Depreciation
  (taxed at 25%)
$
    plus Federal Capital Gain Tax
   (remainder taxed at 15%)
+$
    plus State Capital Gain Tax: +$
    = TOTAL ESTIMATED TAXES =$
    Simple Exchange Fee at 1031x.com -$
    = YOUR SAVINGS =$
     


 

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We can answer your questions about capital gains tax.

Contact us now!

1-888-899-1031

Basics of Capital Gains Tax

You have a capital gain when you sell an asset for more than you paid for it. So, for instance, if you bought a property for $100,000 and you now sell it for $250,000--well congratulations! Most simply you could say you have a capital gain of $150,000 (What you sold it for - what you paid for it)--and of course, the IRS and your state revenue department will have something to say about that profit!

It is a little more involved than that, but keep reading-- we'll get into the details as we go.


Earned vs. Unearned Income

Salaries, tips, self-employment income is all considered income that you have "earned." Income from sources other than employment is considered "unearned" income, for example, dividents, interest, investment income or unemployment compensation.

That property that we mentioned above--the profit that you made on it would be considered "unearned income" and would be taxed at the Capital Gain's rate.


Are Capital Gains Tax Rates The Same For Everyone?

Your Capital Gains Tax Rate varies based on your tax bracket.

For those in the 10% and 15% tax brackets, they pay NO tax on long-term gains on most assets. If your tax bracket is between 25% to 35%, your capital gain tax rate is 15% on long-term capital gains. For those in the top 39.6 % bracket for earned income, the rate is 20%.


Katy's Ice Treats Shop
(Capital Gains Example)

It's been a warm summer, and Katy couldn't be happier!

Her ice treats shop has been increasingly successful, and she needs to move into a larger place. Even better--her 800 ft "starter" store has been increasing in value!

Katy had originally bought the store for $50,000 plus $4,000 in closing costs. She immediately invested an additional $6,000 to make improvements to enhance her customer's experience. (And they loved it!)

This means that Katy's total investment was $60,000--that is her BASIS in the property.

 

$54,000 (price paid) + $6,000 (improvements) = $60,000 (Total Investment: Basis)

 

When Katy files her taxes, she deducts $1,538 which is her DEPRECIATION. She does that again in her second year of business. That means her total depreciation she has deducted is $3,076.

Katy's real estate agent is happy to let Katy know that she can now sell her property for $120,000. "That's great!" thinks Katy. "I can use that extra money to move into a bigger store I need."

Time to figure out the numbers....
If the property is sold for $120,000 with $8,400 in expenses/closing costs, that would yield $111,600. If you subtract the original investment (basis) of $60,000, there appears to be $51,600 to put to the new property. Katy will need every little bit of it to grow.

However, if Katy has to pay the taxes on her gain, she will need to pay 15% to the federal government and 5% to the state on the increase + 25% on the depreciation. Katy found the Capital Gains Tax Calculator on 1031x.com. She calculated her capital gains would be $54,676 and her taxes on that were estimated to be more than $11,000! This will make it impossible for Katy to move.

 

$120,000 (sale) - $8,400 (costs) - $56,924 (adj. basis) = $54,676 (Capital Gain)

 

Fortunately, Katy contacts 1031x.com and learns how a exchange can allow her to defer her capital gains tax of $11K+ so she can buy the new property. Great! But how does that work?

Katy made a simple call to Chris at 1031x.com, and he took down the addresses for both properties and the closing information. Since Katy was relinquishing her old property and replacing it with another property for her business within 180 days, she would qualify to defer her capital gain taxes. Sean at 1031x.com setup an exchange account at their FDIC insured bank and worked with the closers when the property was sold and when the new property was purchased. He made sure that the IRS Section exchange rules were followed and the money was transferred through the intermediary (1031x.com).

Deferring the $11K in capital gains taxes let Katy move to a her new larger store and take her income to the next level. While she will pay her capital gain taxes when she "cashes out" of the property and doesn't invest in another property for her business, for now, the advantage of doing a exchange will let her grow her business!

(This story is for illustration purposes only. Tax calculations are estimates--your tax obligation will be unique to your situation.)


The Economic Impact of Capital Gains Tax Deferral

Investors who use exchanges to defer their capital gains tax generally have extra capital to improve the properties they purchase. This is one of the reasons IRS Section 1031 is viewed as a boost to the economy in the United States. As in our story above, the extra capital allows businesses--especially small businesses--to continue to grow. Deferring the tax obligation does not remove it, but merely delay it as a way to provide opportunity for businesses.

"Investors who use 1031 to defer their capital gains tax have extra capital to improve the properties they purchase."

Deferring tax obviously has a cost. But is the impact positive or negative? A recent study done by David C. Ling for the University of Florida and Syracuse University, found that overall, while there was a cost to deferring taxes, there were also positive benefits for the economy. These benefits included: Support of Liquidity in the Market, Stability of Property Values and Stability of Rents.


Using the Capital Tax Calculator

Our tax calculator is designed to help you consider how deferring capital gains can allow you to have more capital available as you manage your investments. Of course, they are estimates, and there are many factors that will play into a tax situation.

Capital Gains Tax Calculator Definitions


So this is where you total up all the depreciation you have taken on this property.

Original Price: The purchase price of the property including all fees / costs.
State Capital Gains Rate: Click to see list of State Capital Gains Tax Rates. Please note: These are for estimation only--they change periodically, so be sure to double check your rate.
Original Price: The purchase price of the property including all fees / costs.
Improvements: Money you spent to improve the property. Please note: these are generally defined to be "capital" improvements. In general, these are improvements which stay with the property. For instance, you add air conditioning to your property. It increases the property's value, and when you sell the property it is included.
Depreciation: The IRS does not allow you to deduct all the value of your investment at the time of your purchase. Commercial property is generally depreciated over 31 years. This means that for every year you own it, you can deduct 1/31 of the value of the property to allow for the "wear and tear" -- the "use" of the property which could theoretically decrease its value. While this sometimes happens, more often, in the United States, property values increase. This is a great advantage to investors; however, it means you must plan for Recaptured Depreciation which will be taxed at 25%.
Net Adjusted Basis: The Net Adjusted Basis is used to determine what the IRS will consider your "profit" or "Capital Gain."
Sales Price: The purchase price you pay for the replacement property.
Costs of Sale: These are the costs that you incure when selling the property, including things like commissions, title insurance and legal fees.
Capital Gain: This number indicates your "profit" or "gain" on the property. This is used to determine your tax liability.
Recaptured Depreciation: While the IRS does let you deduct a portion of the asset's basis each year to represent "wear and tear" or "using up the asset," if the property sells for more than the remaining basis--which, fortunately, is most often the case, well, you owe taxes on all that depreciation. They are "recapturing" the depreciation. And taxing it at 25%! The longer you hold the property the more impactful this is for you.
Total Estimated Tax: This gives you an idea of how much your tax bill might be with this property. It includes both federal and state taxes, when applicable.
Simple Exchange Fee: Exchange companies are called qualified intermediaries, and they work to make sure you are able to conduct this transaction "at arms length" and qualify for the deferral of your taxes.
Your Savings: If you are buying a replacement property, it makes sense that you will consider an exchange to allow you to re-invest your savings in the new property.


We can answer your questions about capital gains tax.

Contact us now!

1-888-899-1031

State Tax Rates

 

State Tax Rate
California 13.30%
Oregon 9.90%
Minnesota 9.85%
Iowa 8.98%
New Jersey 8.97%
Vermont 8.95%
New York 8.82%
Maine 7.95%
Wisconsin 7.65%
Idaho 7.40%
Hawaii 7.30%
Arkansas 7.00%
South Carolina 7.00%
Montana 6.90%
Nebraska 6.84%
Connecticut 6.70%
Delaware 6.60%
West Virginia 6.50%
Louisiana 6.00%
Kentucky 6.00%
Georgia 6.00%
Missouri 6.00%
Rhode Island 5.99%
North Carolina 5.80%
Maryland 5.75%
 
State Tax Rate
Virginia 5.75%
Ohio 5.42%
Oklahoma 5.25%
Massachusetts 5.20%
Alabama 5.00%
Illinois 5.00%
Mississippi 5.00%
Utah 5.00%
New Mexico 4.90%
Kansas 4.80%
Colorado 4.63%
Arizona 4.54%
Michigan 4.35%
Indiana 3.23%
North Dakota 3.22%
Pennsylvania 3.07%
Alaska 0.00%
Florida 0.00%
Nevada 0.00%
New Hampshire 0.00%
South Dakota 0.00%
Tennessee 0.00%
Texas 0.00%
Washington 0.00%
Wyoming 0.00%