When you sell a stock for a profit, you need to calculate the total capital gain for your taxes. This is pretty straightforward when you bought all your shares on the same day: Just find the difference between the buying price and selling price. However, this calculation is a bit trickier when you bought your shares in multiple stock buys, as each purchase was likely at a different price. With the specific identification method, you have an easy system to figure out your gains.
Contact your broker and ask for your purchasing history for the stock. The broker will tell you the days you bought shares, how many shares you bought in each transaction and how much you paid for each share. For example, you could have bought 10 shares in January for $10, 10 shares in March for $30 and 10 shares in June for $40.Step 2
Decide whether you want to get the lowest tax bill today or defer your tax savings for the future. To reduce your taxes this year, you want to sell the most expensive shares. Selling the least expensive shares creates the largest tax bill.Step 3
Subtract your total sale proceeds from the amount you paid for the shares that are being sold. If the stock's market price is $50 a share and you sell the 10 shares bought for $40 a share, your total gain is $50 x 10 – $40 x 10 = $100.Step 4
Pick the batch of shares that does the second-best job of meeting your tax goal, if you want to sell more shares than in the first group. If you want to sell 15 shares and minimize taxes, you would sell all 10 of the $40 shares and five of the $30 shares. This would create a gain of $50 x 15 – $40 x 10 – $30 x 5 = $200.Step 5
Repeat this process until you've accounted for all the shares you want to sell.Step 6
Contact your broker and tell him which shares you want to sell. He will record the transaction for your future taxes.
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