How do you figure out sales tax
Q: I just sold more than $300,000 worth of stock that I've held for more than 30 years. How do I find out how much tax I will owe?
A: Calculating capital gain taxes seems to be on investors' minds these days.
You can get tripped up by the whole capital gains situation for a variety of reasons. First, there are several key rules about timing of stock sales that can affect the tax rate. Then, there's the whole issue of bookkeeping. Few investors have the discipline to faithfully track what they paid for stocks, especially over 30 years.
But you can tackle this if you take it one step at a time. Most important, you'll need to dig out how much you paid for the stock, including commissions and any reinvested dividends.
Since you've held the stock such a long time, it might take some legwork. A previous Ask Matt column provides some guidance on how to do this.
Basically, you find the price you paid, multiply that by the number of shares you bought, then add the commission you paid to buy the stock. That total is your cost basis.
Next, you need to determine how much
you sold the shares for and the total proceeds from the sale. This part is easy. Your total proceeds should be on the trade confirmation you received from your brokerage. Subtract your cost basis from the proceeds of the sale and you have measured your capital gain.
Now, it's time to determine how much you owe Uncle Sam. There are several things to keep in mind. First, if you own a stock a year or less, you will pay tax at your ordinary income tax rate. However, since you owned the stock 30 years, you qualify for the much lower maximum capital gains rates. You can find out here which rates apply to you .
If all this seems like a hassle, you might want to check out financial software that can do some of the heavy lifting. Many websites offer capital gains tax estimators like this one.
Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at firstname.lastname@example.org. Click here to see previous Ask Matt columns. Follow Matt on Twitter at: twitter.com/mattkrantzSource: usatoday30.usatoday.com