topic What the % shall I use in estimating tax prepayment from stock gains? What if the sale is in the last quarter? in Investors & landlords

What the % shall I use in estimating tax prepayment from stock gains? What if the sale is in the last quarter?

catdelta — Mon, 13 Jul 2020 15:31:48 GMT

Hello everyone, I understand that I need to make advance federal tax payment if I have sizable gains from stock selling. My specific questions are:

1. Do I need to prepay state tax as well?

2. Is it enough if I assume 15% tax on capital gain and 30% on short term gain?

3. What if the sale happens in Q4 (or more extremely, nearly year end)? Since I would have no time to prepay, will I be charged penalty?

Thank you very much.

Re: What the % shall I use in estimating tax prepayment from stock gains? What if the sale is in the last quarter?

TomYoung — Mon, 13 Jul 2020 16:49:44 GMT

"1. Do I need to prepay state tax as well?"

I can only speak to California which pretty much mimics federal law in this area. I'd guess most or all states with an income tax would also require estimated tax payments.

"2. Is it enough if I assume 15% tax on capital gain and 30% on short term gain?"

I'd say "yes", for federal purposes, but understand that these issues always depend on your personal facts and circumstances.

"3. What if the sale happens in Q4 (or more extremely, nearly year end)? Since I would have no time to prepay, will I be charged penalty?"

The last estimated tax payment is due on 1/15 of the following year, so you'd certainly have time.

Re: What the % shall I use in estimating tax prepayment from stock gains? What if the sale is in the last quarter?

Carl — Mon, 13 Jul 2020 17:30:44 GMT

I've always recommended a quarterly federal tax payment of at least 20% of one's gross earnings, for income received where taxes were not withheld by the payer.

For state taxes, I always recommend a percentage equal to whatever the highest rate your state taxes personal income at. At this time, the highest rate I'm aware of is something like 8.5%, but I don't recall which state. CA maybe? Or NY?