California real estate capital gains tax calculator

Individual’s Tax Information

State of Residence for Tax Purposes

Estimated Taxable Income (exclusive of this transaction)

Your Federal Ordinary Income Tax Rate

Your Capital Gain Tax Rate

Section 1411 Medicare Surtax (Affordable Care Act Tax)

Your State Capital Gains Rate

Property Being Sold

State where Property is Located

Time from Purchase to Sale

Original Cash or Equity used to Purchase the Asset

(Add) Recourse Debt Used to Purchase the Asset

(Add) Transaction Costs, Commissions, Fees on Purchasing

(Add) Total Spent Improving/Repairing During Ownership

(Less) Depreciation or Amorization Taken During Ownership

(Less) Deferred Gain from Previous 1031 Exhange(s)

(Less) Balance on Debt to Pay Off

(Less) Transaction Costs, Commissions, Fees on Selling

Net Cash Received on Sale

Selling Price on the Property

(Less) Adjusted Tax Basis – Property

How to Figure Out Your Short-Term and Long-Term Capital Gains Tax

Capital gains tax can apply to short-term or long-term capital gain. This section will break down the differences between short-term and long-term capital gain taxes to help you figure out how these terms apply to your assets and affect your tax rate.

Short-Term Capital Gains Taxes

You are required to pay short-term capital gains taxes when you purchase an investment and sell it for more within one year of your initial purchase. In other words, you need to pay short-term capital gains taxes whenever you sell an investment after not much time. In general, short-term capital gains tax rates can be more than the tax rates for long-term capital gains to help incentivize investors to hold onto their investments for longer periods.

Your income tax rate, which is based on your household income, determines how much you are allowed to be taxed on short-term capital gains. You will have to add your short-term capital gains to your income before determining your tax rate rather than determining your tax rate with just your income. The increased taxable income due to short-term capital gains could transition you to a higher tax bracket, which you should consider before deciding whether to sell an investment and realize your gains.

Long-Term Capital Gains Taxes

On the opposite end of the spectrum, long-term capital gains tax applies to paying taxes on profits for investments. You’ve held those investments for over one year in this case. 

Contingent on your annual income and your filing status, the tax rate for your long-term capital gains can range from anywhere between 0% to 20%. There are a few exceptions, such as collectibles being taxed at a minimum 28% rate. These tax rates are usually lower than the tax rates for short-term capital gains, often making it worthwhile to hold investments longer.

Here is a more in-depth look at the steps for calculating your long-term capital gains tax:

• Determine your cost basis: First, you will need to determine your cost basis, which is typically the purchase price for an asset plus any fees or commissions paid.
• Figure out your realized amount: Your realized amount is your asset’s sale price minus any fees or commissions paid.
• Subtract your cost basis from the realized amount: This step involves subtracting what you paid for the asset from how much you sold it for and determining the difference. If the result is more than what you initially paid — a profit — you have a capital gain. If the result is less than what you paid, you have a capital loss, which you can use to offset your capital gains.
• Find your tax rate: Find the tax rate for your long-term capital gains by matching your filing status and income to the appropriate rate.
• Apply your tax rate to your long-term capital gains: Use the answer you got from subtracting your basis from the realized amount and the tax rate for your long-term capital gains to find out how much you will owe in long-term capital gains taxes this year.

Make figuring out how much you owe even easier by using our long-term capital gains tax calculator. Simply plug your original purchase price, sales price and other variables into the appropriate fields, and the calculator will compute the numbers for you.

How to Minimize Capital Gains Tax

While the profit you earn whenever you sell an asset at a higher price is known as a capital gain, selling an asset at a lower price than you bought it for is known as a capital loss. You can minimize the total taxes you owe by offsetting your long-term capital gains with your long-term capital losses. The difference you get from subtracting your capital losses from your capital gains is known as your net capital gain.

Similarly, you can use any short-term capital losses to offset your short-term capital gains. However, you cannot use a long-term capital loss to offset a short-term capital gain or vice versa. If your capital loss ends up being more than your capital gain, you could claim a tax deduction to reduce your income.

Below are four of the top strategies for minimizing your capital gains taxes and reducing your tax burden.

1. Hold on to Your Assets Longer

Whenever you can, try to hold on to an asset for at least a year or more. Holding on to your assets longer can qualify you for long-term capital gains tax rates, which tend to be lower than the short-term capital gains tax rates applied to most assets. Plug your assets into a capital gains tax calculator to find out how much you could save by waiting to sell your assets.

2. Carry Over Your Losses

If your net capital loss is greater than the limit you can deduct for the year, the IRS will permit you to carry over the excess capital loss into the following year. Carrying over your excess capital losses is an excellent tax advantage because it allows you to deduct more from the next year’s return.

3. Invest in Opportunity Zones

Congress identified distressed areas under the Tax Cut and Jobs Act of 2017 and labeled them as Opportunity Zones. The goal was to increase investment in these locations for housing, small businesses and infrastructure. 

Investing in Opportunity Zones with capital gains from selling real estate allows you to utilize a number of tax benefits. Profits from capital gains that are reinvested into an Opportunity Zone can be deferred for up to eight years on various asset classes, including hospitality, self-storage and diverse portfolios. 

Investors will also be eligible for a 10% decrease in capital gains tax after holding the investment for five years or more. Additionally, investors who hold the investment for 10 years or more will be fully exempt from capital gains taxes on invested funds. Investment in Opportunity Zones also contributes to the growth of economically disadvantaged communities.

4. Make the Most of 1031 Exchange Opportunities

If you sell any investment or rental properties, you can avoid both capital gains and depreciation recapture by identifying the property for transfer within 45 days and rolling the profits of your property sale into a similar type of investment within 180 days. This variation of like-kind exchange is known as a 1031 exchange, earning its name from the relevant section of the tax code.

Engaging in a 1031 exchange can enable an investor to avoid paying some capital gains taxes. Although a 1031 exchange is often a reliable method for avoiding capital gains tax, the rules for 1031 exchanges are extremely complex. In fact, many people have jobs devoted solely to helping clients navigate 1031 exchanges.

If you are considering a 1031 exchange, make sure you work with an experienced 1031 exchange management team.

Other Variables to Consider When Minimizing Capital Tax Gains

When attempting to minimize your capital tax gains, there are two key factors you need to watch out for — rule exceptions and the net investment income tax. Being aware of these variables will help you calculate the total capital gains taxes you owe for the year as accurately as possible.

While the standard capital gains tax rates apply to most assets, they do allow for a few noteworthy exceptions. Rule exceptions can be tricky because they allow long-term capital gains on certain types of assets, known as collectible assets, to be taxed at a higher rate. Collectible assets include items such as antiques, fine art, coins, precious metals and more. Those exceptions also apply to section 1250 real properties, such as commercial buildings and rental properties.

Along with rule exceptions, the net investment income tax can affect capital tax gains. Some investors end up owing an additional tax percentage on either their net investment income or the total by which their modified adjusted gross income exceeded the income threshold set for their filing status and tax bracket. Whichever amount is smaller will be subjected to this additional tax.

1031 Exchange Capital Gain Examples

In general, you can follow the three following simple steps to calculate the cost basis of a new property involved in your 1031 exchange:

1. Begin with the adjusted basis for the property you sold, including any original mortgage you may have taken out.
2. Add up the value of any other property you transfer in the 1031 exchange, the amount of cash you are putting toward the new purchase, the mortgage amount on the new property and any realized gain on the sold property. Keep in mind that not all of these factors will apply to every 1031 exchange.
3. Subtract any property or money you received during the exchange, the amount of the mortgage for the sold property and any capital losses on any properties sold in the exchange.

These three steps will help you calculate the basis for any asset acquired as part of a 1031 exchange. However, looking at a couple of specific 1031 exchange capital gain examples can help you understand the concept better.

Single Taxpayer

Imagine a single taxpayer wanted to perform a 1031 exchange by selling an asset for $300,000 with a $150,000 mortgage on the property at the time of the sale. The adjusted cost basis for the property is $170,000, and the single taxpayer completes the exchange by purchasing a property for $500,000 with a $250,000 mortgage.

In this situation, the new basis would be calculated by taking the original asset’s adjusted basis of $170,000 and adding the new mortgage of $250,000 to it, then subtracting the original property’s outstanding mortgage of $150,000. Completing this calculation produces a new basis of $270,000. This new basis can be used to go through the usual long-term capital gains tax calculation steps listed above.

Married Taxpayers

For this example, imagine married taxpayers who are filing jointly. Years ago, the couple purchased a rental property for $1,500,000. The rental property’s mortgage was $1,000,000 at the time of the sale, and taking the couple’s joint income into account brings the adjusted cost basis to $1,175,000. The exchange gets completed when the couple buys a property for $3,975,000 with a mortgage of $2,000,000.

For this case, the new basis can be determined by adding the new mortgage of $2,000,000 to the property’s adjusted basis of $1,175,000, then subtracting the original property’s outstanding $1,000,000 mortgage. This formula yields a new basis of $2,175,000, which can be used to calculate the total long-term capital gains for the couple’s rental property.

Fortunately, you do not have to memorize the formula for calculating your 1031 exchange capital gains. Instead, partner with a Qualified Intermediary (QI). A dependable 1031 exchange company can recommend the right QI for handling your 1031 exchange process.

Need Help with Your 1030 Exchange? Contact 1031 Crowdfunding

Now that you know the basics of capital gains taxes and how to minimize them, you may be ready to start exercising the recommended techniques for calculating and minimizing your capital gains taxes. To learn how to use a capital gains tax calculator to assess selling a rental property or whether you should attempt a 1031 exchange, 1031 Crowdfunding’s 1031 exchange services can help you handle the logistics and assess your options.

The experienced management team at 1031 Crowdfunding can help you figure out how a 1031 exchange could benefit you by reducing your capital gains taxes. Joining the Crowd will also give you access to an online marketplace of fully vetted 1031 exchange properties chosen by qualified real estate professionals, simplifying the 1031 exchange process for you and decreasing the closing risk.

Register with 1031 Crowdfunding or contact us today to learn more about how you can minimize your capital tax gains this tax season.

While the information provided above has been researched and is thought to be reasonable and accurate, 1031 Crowdfunding are not lawyers or tax professionals. It’s important to consult with a licensed tax professional regarding your personal tax situation.

This material does not constitute an offer to sell or a solicitation of an offer to buy any security. An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. This literature must be accompanied by, and read in conjunction with, a prospectus or private placement memorandum to fully understand the implications and risks of the offering of securities to which it relates. As with all investing, investing in private placements are speculative in nature and involve a degree of risk, including loss of your principal. Past performance is not necessarily indicative of future results and forward-looking statements and projections are not guaranteed to achieve the results described and your actual returns may vary significantly. Investments in private placements are illiquid in nature and there may be no secondary market or ability to sell the investment should the need for liquidity arise.  This material should not be construed as tax advice and you should consult with your tax advisor as individual tax situations will vary. Securities offered through Capulent, LLC Member FINRA, SIPC.

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