How is sale of stock taxed

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Stock Advisor launched in February of Prev 1 Next. Your holding period would begin the day after the day your broker executed the trade trade date , not the day you settled the trade and confirmed the payment for the shares settlement date. Then, if you decided to sell that entire block in one trade, your sale proceeds would be the price at which you agreed to sell the shares less any commissions and fees you paid to affect the sale. Your sale date used to determine your holding period generally would be the trade date of the sale again, generally not the settlement date.

If you were to have sold the stock for more than your adjusted cost basis, you'd have a taxable gain; if less, a loss. If you owned the stock for more than one year generally measured from the day after the trade date of the purchase to the trade date of the sale , you would report that gain as a long-term capital gain. Otherwise, you'd report any gain as a short-term capital gain for the year of the sale. If you were to have sold at a loss, you could use that capital loss to reduce any other capital gains you might have had.

If there were any remaining capital losses after these steps, you could generally apply them to capital gains or income in future years, in what would be known as a capital loss carry forward. Many investors' positions include shares that were acquired on different dates and at different prices, perhaps due to multiple trades, dividend reinvestment programs, or the exercise of options, warrants, and incentives. Assuming that you have complete records that show how, when, and at what cost each portion of your position was acquired, you have two choices when you figure your taxes.

One option allows you to assume that you sold the shares you've held on to the longest and use that price information for your cost basis in figuring your gain or loss. The other option is called specific identification, which means choosing which block of shares in your position you use to figure your cost basis. Specific identification may offer you the potential to manage the size of any gain or loss you might realize in a particular trade.

However, to be eligible to use specific identification at tax time, you must have instructed your broker about which shares you were selling at the time of the trade no later than settlement day. Your broker should provide written confirmation of the specific identification in writing within a reasonable period of time after the sale.

Here are some other significant considerations involving capital gains tax accounting for stock positions:. If you want to trigger a relatively small tax bill, select the shares in the stock position that would produce the smallest possible capital gain when sold.

If you have a large capital gain elsewhere that you'd like to offset, consider selling any shares that might generate a large capital loss. But remember that, even with an apparently losing position, the value of any immediate tax-loss harvesting should be balanced against the long-term potential of the company. Finally, please keep in mind that this discussion is only a general guide.

It may not address all of the factors relevant to your circumstances and needs. Seek professional tax advice before taking any action.

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Locations Contact us Schedule an appointment. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. How does selling stock affect my taxes? Your B has the info you need To figure out whether you have short or long-term gains, take a look at your B form. How do I report an 83 b election on my taxes? What is restricted stock and how is it taxed? What's the difference between restricted stock and a restricted stock unit RSU? Was this helpful?

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