Key Takeaways
- To determine if you have a capital gain, take your sales price and subtract the original purchase price. The resulting gain is counted as income for tax purposes. If you held the asset for more than one year, you pay a preferential long-term capital gains tax rate of 0% to 20%, as opposed to the short-term capital gains tax rate of 0% to 37%.
- Investors can download investment income forms from their brokerage firm: IRS form 1099-B for capital gains, 1099-DIV for dividend income, and 1099-INT for interest income.
- Investors who need time to pay the full amount of their tax liability can apply for a monthly installment plan using IRS Form 9465.
If you sold investments for a profit in 2023, you could be facing a tax bill unless you sold other investments at a loss to offset that profit. In either case, just how much of your investment income is taxable and how it will be taxed can be a challenge to figure out.
Here is a rundown on paying taxes on investment income:
To determine if you have a capital gain, take your sales price and subtract the original purchase price. The resulting gain is counted as income for tax purposes, says David Blain, CEO of New Bern, North Carolina-based BlueSky Wealth Advisors.
Capital gains are classified as either long term or short term. Short-term capital gains are taxed at your ordinary income tax rate. You incur a long-term capital gain when you sell an investment that you…
