topic How can I estimate the capital gains tax that may be owed on a stock sale? in Get your taxes done using TurboTax

How can I estimate the capital gains tax that may be owed on a stock sale?

feimster — Wed, 25 Oct 2023 22:40:01 GMT

I recently sold stock that was purchased through ESOP (employee stock ownership program). How can I estimate the capital gains tax that may be owed on that sale?

Re: How can I estimate the capital gains tax that may be owed on a stock sale?

Anonymous_ — Thu, 26 Oct 2023 20:52:54 GMT

@Mike9241?

Re: How can I estimate the capital gains tax that may be owed on a stock sale?

Paul_W1 — Thu, 26 Oct 2023 22:03:45 GMT

Hi Mike9241,

Our apologies for not getting a reply to you. Let me understand your question. You have sold stocks from your ESOP plan from which your company gave you, is that correct? I will respond based upon the information I seem to understand. There are a few questions we need to address about the transaction and some timelines. When did you receive the stocks? How long have you held them? Regardless, you should be receiving a 1099-B from the brokerage firm regarding this transaction.

I have included a link about ESOPs which work very similar to ordinary stock transactions.

https://turbotax.intuit.com/tax-tips/investments-and-taxes/how-to-report-stock-options-on-your-tax-return/L3K0l47J2. Additionally, I am providing this link about the differences on long term and short term capital gains taxes. As you review this link, be aware of the holding periods for short term as less than one year and long term is more than one year. https://turbotax.intuit.com/tax-tips/investments-and-taxes/guide-to-short-term-vs-long-term-capital-gains-taxes-brokerage-accounts-etc/L7KCu9etn

I hope that this information is helpful to determine the tax regarding the sale of the stock.

Re: How can I estimate the capital gains tax that may be owed on a stock sale?

MariaDG1 — Thu, 26 Oct 2023 22:26:38 GMT

The information Paul shared is excellent. I would like to add a couple of things.

If your shares were purchased through an employee stock purchase program, then this resource may be helpful to you.

The important thing to note is whether you have a 'qualifying disposition'. This means that you sold the shares at least 1 year after the purchase date AND 2 years after the offer date. In this case you will report your 'discount' off the market price as ordinary income, and the gain in value on the shares as long term capital gain. Your employer may or may not have included the discount on your W-2, so check carefully to ensure you don't double report it.

If is not the case, then your employer will include your 'discount' on your W2 as income, so do not double report it. The gain may be short or long term depending on your situation.

The resource Paul shared will help you determine which capital gains rate applies to you so you can estimate your tax due.

Be sure to add the 'discount' amount (which was already taxed as ordinary income) to your basis so you don't report too much gain and get double taxed.