How to Calculate & Report Capital Gains Taxes to the IRS
- 1). Tally your long-term capital gains and losses for the year. Add up your gains and losses from stocks or bonds that you sold and that you had held for over a year. For instance, suppose that you sold your long-term stock portfolio and netted a $5,000 gain.
- 2). Tally your short-term capital gains and losses for the year. Add up your gains and losses from stocks or bonds that you sold and that you had held for less than a year. For instance, suppose that you sold your short-term stock portfolio and netted a $3,000 gain.
- 3). Multiply your long-term capital gains by 0.15 and your short-term capital gains by your current income tax rate and add the results together to determine the amount you owe in capital gains taxes. For example, if you are in the 28 percent income tax bracket:
Taxes owed = 0.15 x $5,000 + 0.28 x $3,000 = $1,590 - 4). Fill out IRS Form 1040 (Schedule D) with the information from your investment transactions. You will have to detail each asset you bought and sold, its value, and the dates of the transactions. There is a line on the form where you will put the total capital gains taxes owed. Also, know that if your investment transactions exceed in number the available lines on the form, you will have to attach a supplemental sheet with the rest of your transactions.
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