Selling Stocks, How Much is Owed?

It’s the end of the year and people are beginning to think about how much taxes they will owe (or be refunded). Over the course of the year some people may have decided to sell their stocks whether it be for a gain or loss. Their question is probably, how much money will I owe on the gains or losses?

The first question is if you owned the stocks in a Roth IRA? If you did, and you’ve had the account for a minimum of five years then you will owe no taxes at all. It will be different if you use a traditional IRA or another tax-differed retirement account. In these instances so long as the money remains in your account you won’t owe any taxes, once it is removed you will be taxed at your ordinary income rate.

If your stocks are kept in a typical brokerage account, it can be more complicated. For instance, in order to claim long-term capital gains tax on the stocks they must have been held for at least a year and a day. Any less time than a year and a day, the profit earned will be taxed as ordinary income.

Additionally, do not forget about taxes on dividends that would have been paid before the sale of the stock. Stocks and taxes can be tricky so if you have questions, contact us at the Center for Financial, Legal & Tax, Inc.