How Much Stock Can You Sell Without Filing It on Your Federal Income Tax?

If you sell some shares of stock you own, you must report the results of the transaction on your tax return. It does not matter if you had a gain or a loss or only sold one share; you must complete the capital gains reporting forms to be attached to your tax return. The tax rules are very clear on the matter.

Capital Gains and Losses

When you sell something you own -- which can be an investment or another sort of property -- you produce what the Internal Revenue Service classifies as a capital gain or loss. You must report all gains, whether you sold shares of stock or your old stereo system for more than you paid. The only losses that must be reported are from assets held for investment, such as stocks, mutual fund shares, bonds or investment property. The reportable gain or loss will be the difference between the selling price and purchase price. Items such as broker commissions are included in the transaction results.

Required Tax Forms

The sale of stock shares means that you must use the longer Form 1040 tax return to file your taxes. If you usually use the shorter 1040A or 1040EZ for the year of your stock sale, you get to move up to the long form. The results of your tax sale go onto a Form 8949 with all of the investment gains or losses you generated for the year. Totals from the Form 8949 are transferred to a Schedule D, which, when completed, will combine your gains and losses into the categories that go onto the Form 1040.

Help From Your Broker

For any stock shares you sell, your broker will send a Form 1099-B at the end of the year that lists what was sold, the date and the amount the shares were sold for. The sales listed on the 1099 must be transferred to the Form 8949 and used to complete the rest of the required tax forms. In most cases the 1099 will also list your costs for the sold shares, which will simplify the completion of your 8949. If the 1099 does not include cost information, you need to do your research to find and report the prices you paid for the shares.

Tax Rate Considerations

Capital gains and losses are divided into short- and long-term results, with a one-year holding period cutoff between the classifications. You will pay a lower -- possibly zero percent -- tax rate on any long-term gains from your stocks. Capital losses are used to reduce any taxable gains and extra losses can be used as a write-off against your other income. Only $3,000 of excess losses can be claimed in a year, and any extra losses are carried forward to future tax returns.

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About the Author

Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.

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