How to Figure How Much Tax Is Owed on a Stock You Sold

You must include gains from stock sales when you file your federal income tax return.

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When you sell a stock for more than you paid for it you make a profit. The Internal Revenue Service refers to this profit as a capital gain, and wants its fair share in the form of capital gains taxes. How much you pay in capital gains tax varies based on how long you owned the stock before you sold it. As long as you've kept good records, you should be able to figure your capital gains tax without much trouble.

Step 1

Determine your basis. For most basic stock purchases, your basis is the price you paid for your stock plus any additional costs associated with making the purchase, such as brokerage fees, commissions, transfer fees or recording fees. If you acquired your stock at different times, you need to identify which shares you sold. This could make a difference between having a short-term or long-term capital gain. There are other methods of determining your basis if you acquired your stock though a method other than purchase, such as an inheritance or gift. The most common form is using the fair market value of the stock immediately prior to you taking possession of the stock.

Step 2

Determine your net proceeds from the stock sale. This is the sale price of the stock, less any costs associated with making the sale, such as broker commissions and fees. Subtract your net proceeds from your basis. If the result is a positive number, you have a capital gain. If the result is a negative number, you have a capital loss that you might be able to use to offset other gains.

Step 3

Check your purchase and sale dates. If you owned the stock for one year or less, the IRS considers the resulting gain or loss to be short-term. Short-term capital gains on stock trades are taxed at the same rate as your ordinary income. If you owned the stock for more than one year before you sold it, the IRS considers the resulting gain or loss to be long-term. Long-term capital gains are typically taxed at a maximum of 15 percent. Figure your gains or losses from all of your stock disposition transactions on IRS From 8949, then transfer the results to IRS Form 1040, Schedule D. Complete Schedule D to determine your tax liability for the sale.

Items you will need

  • Stock purchase and sale records


  • You might be able to offset some of your stock sale capital gains with stock sale capital losses.


  • Long-term gains from the sale of some types of stock, such as Section 1202 qualified small business stock, may be taxed at up to 28 percent.

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About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.

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