# Do I Pay Taxes on Stock Income If I Invest in a House?

The stock market can help you grow your savings to reach your investment goals, including saving up to buy a home. However, the IRS doesn’t allow you to exclude any stock income just because you used the proceeds to buy a home, even if it’s your first one. But, with a new home comes the potential for additional tax breaks.

## Stock Capital Gain Calculations

When you sell your stock, you have taxable income only if your proceeds exceed your basis. The proceeds equal the amount you sold the stock for minus any transaction fees. Your basis equals what you paid to acquire the stock, including any transaction fees. For example, say you paid \$500 to buy the shares, plus a \$15 transaction fee and then sold the shares for \$750, but again paid a \$15 fee. Your gain equals the \$735 of proceeds from selling the stock minus the \$515 it cost to acquire it, or \$220.

## Tax Rates

The tax rate that applies to your stock sale depends on how long you owned it. If you sold the stock after owning it for a year or less, it’s a short-term capital gain, which is taxed at the higher ordinary income tax rates. But, if you held the stock for over a year, your gains are taxed at the lower long-term capital gains rates. For example, as of 2013, the maximum ordinary income tax rate is 39.6 percent while the highest long-term capital gains rate is only 20 percent.

## Offset by Losses

Though you can’t exclude any of your capital gains by virtue of using the proceeds to buy a house, you can offset some of your gains with any capital losses for the year. For example, say that beside your \$10,000 in gains, you also have \$3,000 in losses. That means only \$7,000 of your gains will be taxable. When you’re offsetting gains with losses, first use losses of the same classification, either long term or short term. For example, if you have \$5,000 of long-term gains, \$5,000 of short-term gains and \$3,000 of long-term losses, you offset your long-term losses first, leaving you with \$2,000 of long-term gains and \$5,000 of short-term gains.