How Does a Stock Sale Affect Your Taxes?

Hudson, NH Resident Seeks Clarity

Stock shares sold from a regular brokerage account will be subjected to capital gains tax.  If the assets were owned for less than a year, this is short-term capital gains.  For assets that you have had longer, you will need to pay long-term capital gains on the profit.  Short-term capital gains are typically the same tax rate as your current tax bracket, while long-term capital gains can be anywhere from 0% to 20% depending on your taxable income and filing status.

A Hudson resident was looking to sell a large quantity of stock.  Concerned about how this might affect his taxes for the year, he first contacted the experts at Merrimack Tax Associates.

Reducing Your Tax Payment from the Sale of Stock

The best way to reduce the taxes owed on the sale of stock is by holding on to these assets for over a year.  There is a significant difference in the tax rates of short and long-term capital gains.  Instead of choosing a standard brokerage account, you can hold your stock shares in a traditional or Roth IRA or 401(k) account.  This will offer its own tax advantages for the money from a stock sale, as well as any dividends that are paid out over time.

Selling Stocks at a Loss Affects Your Taxes Too

If you are selling your stock shares for a loss, you can deduct this on your tax return.  Up to $3,000 of stock loss can be deducted each year, $1,500 for married couples filing separately.  While you will still lose money on the stock sale in this scenario, there are advantages to using this as a tax write-off.

The Hudson resident is now more confident about how the stock sale will affect his taxes thanks to the team at Merrimack Tax Associates.