Profit, return and tax on a trade
When you sell shares, three numbers matter: the profit in dollars, the return in percent, and what is left after tax. Commissions are often zero at US brokers today, but they still matter for some accounts, foreign shares and options, and they shift your break-even price.
The formulas
- Total cost = shares × purchase price + purchase commission
- Profit = shares × selling price − sale commission − total cost
- Return = profit ÷ total cost
- Tax = profit × tax rate (zero on a loss)
- Break-even price = (total cost + sale commission) ÷ shares
Worked example
You bought 100 shares at $50 and sell them at $65, with no commissions, and the gain is taxed at the 15% long-term rate.
- Total cost = 100 × 50 = $5,000.
- Profit = 100 × 65 − 5,000 = $1,500.
- Return = 1,500 ÷ 5,000 = 30%.
- Tax = 1,500 × 15% = $225, leaving $1,275 after tax.
- Break-even selling price = $50.00 a share.
US capital gains tax rates
| Holding period | Federal rate |
|---|---|
| One year or less (short-term) | Ordinary income rates, 10% to 37% |
| More than one year (long-term) | 0%, 15% or 20% depending on taxable income |
| High incomes, either period | Plus 3.8% net investment income tax |
Most states tax capital gains as ordinary income as well, while a few, such as Florida and Texas, have no income tax. Gains inside a 401(k), IRA or Roth IRA are not taxed when you sell.
Losses
If the result is negative, you have a capital loss. Losses first offset gains of the same year; up to $3,000 of net loss a year can then reduce ordinary income, and the rest carries forward. Beware of the wash sale rule: buying the same or a substantially identical security within 30 days before or after the sale disallows the loss for now.
What the return does not show
A 30% gain earned in one year is very different from the same gain over ten years, which is only about 2.7% a year. To compare trades held for different periods, use the compound annual growth rate. Dividends received while you held the shares are not included here either and add to your total return.
This calculator gives estimates for education and planning. It is not investment, tax or legal advice; for decisions about your own situation, talk to a qualified financial professional.