Then again, most of us prefer a lower tax bill to a higher one. A few more ideas for keeping your tax bill down:. Quarterly estimated tax payments for the tax year are due on the following dates:. State taxes : You may also be subject to state taxes on capital gains. Check with your state tax board for more information. If you're doing more than a few trades a year—or if you're even mildly confused about how these taxes apply to you—consulting with a tax professional may be wise.
They can help you devise a tax strategy for your stock profits and keep you on track with any taxes you owe. Calculating and paying taxes on your capital gains is definitely not the fun part of winning in the stock market. On the other hand, understanding and staying current on your tax liability can help you relax and enjoy the profits you've made. Keeping track of your capital gains, paying or setting aside taxes as you go and working with a trusted tax advisor can all help make the process more manageable.
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Other items to note about short-term capital gains:. If you hold your assets for longer than a year, you can often benefit from a reduced tax rate on your profits. One major exception to a reduced long-term capital gains rate applies to collectible assets, such as antiques, fine art, coins, or even valuable vintages of wine.
Typically, this surtax applies to those with high incomes who also have a significant amount of capital gains from investment, interest, and dividend income. One of the many benefits of IRAs and other retirement accounts is that you can defer paying taxes on capital gains. The negative side is that all contributions and earnings you withdraw from a taxable IRA or other taxable retirement accounts, even profits from long-term capital gains, are typically taxed as ordinary income.
So, while retirement accounts offer tax deferral, they do not benefit from lower long-term capital gains rates. As previously mentioned, different tax rates apply to short-term and long-term gains.
However, if your investments end up losing money rather than generating gains, those losses can affect your taxes as well. However, in this case, you can use those losses to reduce your taxes.
The IRS allows you to match up your gains and losses for any given year to determine your net capital gain or loss. From stocks, cryptocurrency to rental income, TurboTax Premier helps you get your taxes done right. Capital Gains and Losses. Tax Tips for Investors. What is Tax Lien Investing? Non-Retirement Accounts. Estimate your tax refund and where you stand Get started.
Table of Contents. Last Updated:. Share this page on:. Share on facebook Facebook. Share on twitter Twitter. Share on linkedin LinkedIn. You will have either a capital gain or a capital loss, depending on whether you sold the stock for more or less than your cost.
Different tax rates apply to long-term and short-term capital gains, so it is important to keep track of your stock purchase and sale dates.
The IRS classifies capital gains and losses on stock transactions as either long-term or short-term, depending on the length of time you owned the stock prior to the sale. If you owned your stock for one year or less prior to the sale, your gain or loss is short-term. A sales transaction for stock you have held for more than one year will result in a long-term capital gain or loss.
Your gain or loss is determined by whether the sale price, less any sales charges and commission, is more or less than the stock's basis. The stock's basis is typically the amount you paid for the stock plus any sales charges, commissions or other costs of purchase, according to the IRS.
Under certain circumstances, such as a non-taxable stock split, you might have to adjust your cost basis.
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