This week we are going to talk about realized capital gains and losses from stock purchases.
Due to the wild swings in the stocks prices that created a frenzy mainly with GameStop as well as AMC, Nokia, Blackberry and Koss Corp. and so forth this means there will be people and entities with large gains and as well large losses.
For example, as of this recording, GameStop reached a high of $483 a share when 16 days ago (January 19th, 2021) it was stock was trading at $20.
Furthermore, the stock at this moment is trading at $90 per share.
So when it comes to buying and selling your stock, you need to determine what your capital gains will be.
For most assets the capital gains held for more than a year ranges from 0 - 20% depending on your taxable income and filing status. (Such as single or married file jointly)
Now for most assets the capital gain tax rates that are held for less than a year, are treated as ordinary income as if you earned a paycheck.
For example, if your total adjusted gross income or AGI in your household for 2020 is $100,000 and you made $100,000 in capital gains this means your AGI is now $200,000.
Now on the inverse, what you can do is sell securities that have losses to offset the gains through December 31st each year.
For example, if you made $100,000 in gains by selling stock, and you sold other stock for $25,000 in losses. then your net capital gains would be $75,000.
So to determine this information, you can go to your brokerage account and click on the realized gains / losses on your tax summary page at any point during the tax year.
The good thing if you are paying additional tax due to capital gains, then this means that you’ve made money. This is also an important of your budget planning for the year.
If you’d like more information on this topic and others regarding your annual personal finance checkup tune into Podcast #37.
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