Trader Tax Status Designation (TTS) While you may be aware of the taxes related to selling stocks, you may not know the other tax implications of an investment portfolio, such as what you may owe on dividends or interest earned. One of the big limitations in stock investing is the amount of losses you are allowed to deduct on your tax return. Any losses over $3,000 can't be claimed and are simply carried forward as a straight loss. The tax rate you pay on your capital gains depends in part on how long you hold the asset before selling. 2. The profit you make when you sell your stock (and other similar assets, like real estate) is equal to your capital gain on the sale. Clients may consider gifting stock to take advantage of a tax arbitrage. An Example of How the Capital Gains Tax Works . If you sold stocks at a profit, you will owe taxes on gains from your stocks. Your tax bill is partially determined by your holding period, or, in simpler terms, how long you've held the stock. Say you bought 100 shares of XYZ stock at $20 per share and sold them more than a year later for $50 per share. For example, a client subject to a 20% capital-gains tax may gift stock to a family member in the 0% or 15% tax … If you sold stocks at a loss, you might get to write off up to $3,000 of those losses. Yes, better. The IRS taxes capital gains at the federal level and some states also tax capital gains at the state level. Capital gains receive the most preferential tax treatment of dividends, interest and capital gains, so it makes sense to hold investments such as stocks, shares and mutual funds in a non-registered account, and leave the higher-taxed items in a registered vehicle where they can grow tax … Learn more about taxes, when they’re paid, and how to file your tax return. 1 Additionally, when shares are sold, you’ll need to report the capital gain or loss. 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