How do I avoid paying taxes when I sell stock?
There are a number of things you can do to minimize or even avoid capital gains taxes:
- Invest for the long term.
- Take advantage of tax-deferred retirement plans.
- Use capital losses to offset gains.
- Watch your holding periods.
- Pick your cost basis.
Does selling stock count as income?
If you sell stock for more than you originally paid for it, then you may have to pay taxes on your profits, which are considered to be a form of income in the eyes of the IRS. Specifically, profits resulting from the sale of stock are known as capital gains and have their own unique tax implications.
What are the tax consequences of selling stock?
Capital Gains Tax
Any profit you enjoy from the sale of a stock held for at least a full year is taxed at the long-term capital gains rate, which is lower than the rate applied to your other taxable income. It’s 15% if you are in a 25% or higher tax bracket and only 5% if you are in the 15% or lower tax bracket.
Do I have to pay tax on stocks if I sell and reinvest?
Taking sales proceeds and buying new stock typically doesn’t save you from taxes. With some investments, you can reinvest proceeds to avoid capital gains, but for stock owned in regular taxable accounts, no such provision applies, and you’ll pay capital gains taxes according to how long you held your investment.