How to Calculate Tax on Sale of Long Term Stock Holdings
Original post by David Sarokin of Demand Media
A long-term capital gain is the profit made off the sale of a capital asset that you owned for more than one year. If the sale loses money, then it is deemed a long-term capital loss. Either way, the sales should be included with your tax filings. A long-term capital gain becomes part of your reportable income on which taxes are due. Long-term capital gains are taxed at 15 percent, which is a much lower rate than the tax on short-term capital gains.
Obtain a copy of Schedule D, the form for reporting capital gains from stock sales. You can download the form at the Internal Revenue Service website or pick up a copy at IRS distribution points such as a post office or library. Tax software programs, such as TaxACT or TurboTax, also include copies of Schedule D.
Enter a description of the shares to report as long-term holdings in the "Description of property" column on Schedule D. Be certain to enter the information in the section of the form for long-term capital gains. A typical description looks like "1,000 shares of XYZ Corp."
Enter dates for the purchase and sale of the shares in the respective columns on Schedule D.
Enter the price paid for the shares and the price at which they were sold. Enter the total amount for all shares rather than the price per share.
Subtract the original price from the sale price to calculate the capital gains from the sale. For example, if you purchased the shares for $1,000 and sold them after two years for $2,000, your long-term capital gain is $1,000.
Enter your long term capital gains in the appropriate field on Schedule D and carry this amount through the rest of the form and onto your 1040 tax form.
Calculate the tax you owe on your long term capital gains by multiplying the amount gained by the long term capital gains tax rate. The rate was 15 percent in 2010 but can change in subsequent tax years. For example, if your capital gains are $1,000 and the long term capital gains tax is 15 percent then you would owe $150 as the tax on your capital gains.
- IRS.gov: Schedule D--Capital Gains and Losses
- IRS.gov: 2010 Instructions for Schedule D
- IRS.gov; Tax Tip 2011-35--Ten Important Facts About Capital Gains and Losses; February 2011
About the Author
David Sarokin is a well-known specialist on Internet research. A former researcher with Google Answers, he has been profiled in the "New York Times," the "Washington Post" and in numerous online publications. Based in Washington D.C., he splits his time between several research services, writing content and his work as an environmental specialist with the federal government.
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