Yes, you will owe capital gains on this distribution. How much capital gains depends on two things.
- How long you had the stocks. If longer than 1 year, long-term capital gains rate will apply.
- You may have cost basis in the stocks. The proceeds minus your cost basis will determine your capital gain.
For an example, if $1.8M was your actual gain for the year and you are eligible to take the long-term capital gains rate, here is how this is taxed.
2025 Long-Term Capital Gains Tax Brackets (Based on Taxable Income)
- 0% Rate: Up to $48,350 (Single), $96,700 (Married Filing Jointly).
- 15% Rate: $48,351 - $533,400 (Single), $96,701 - $600,050 (Married Filing Jointly).
- 20% Rate: Over $533,400 (Single), Over $600,050 (Married Filing Jointly).
The first $96,200 is taxed at zero percent. From $96,701-$600,050 at 15%. The remaining is taxed at 20% above $600,050. This analysis may be different, but we are using $1.8 as a hypothetical analysis.
If you owned the stocks for less than a year, your gain is taxed at your ordinary tax rate.
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