Basis may also be increased by reinvested dividends on stocks and other factors. This is generally the purchase price plus any commissions or fees paid. Let’s take it step-by-step and find out the answer to “How does capital gains tax work?” Capital gain calculation in four steps The basics of a capital gain calculation is to find the difference between what you paid for your asset or property and what you sold it for. The taxation is classified by the length in which you own the asset, which we’ll describe in detail below! How to calculate capital gains tax - step-by-step ![]() If you sell your asset for more than you bought it, you’ll have a capital gain – If the opposite is true and you sell the asset for less than you bought it, you’ll have a capital loss.Ĭapital gains tax is the taxation of capital assets. ![]() The definition is pretty simple: It’s the difference between what you paid for a capital asset (like bonds, mutual funds, real property, or stocks) and what you sold it for.
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