How are capital gains calculated when selling stock purchased on multiple dates?

Thanks for the detailed response. Does this mean I need to contact my broker directly to specify which lots I want to sell, or is this something I can usually do myself through their online platform? Also, is the default FIFO method applied if I don't specify anything?

Most modern brokerage platforms allow you to select specific lots yourself through their online trading interface. When you place a sell order, look for options like "Select Tax Lots" or "Specify Shares" - it's typically available before you confirm the trade. The exact wording varies by broker. Yes, if you don't specify which shares you want to sell, the default method is typically FIFO (First In, First Out), though some brokerages may have different defaults. You can usually check or change your default cost basis method in your account settings. I'd recommend looking at your specific broker's help section about "cost basis selection" or "lot selection" for the exact steps.

How does it work with multiple brokerages? I have accounts with both Fidelity and Vanguard and tracking everything across both has been a nightmare.

Did you have to manually enter all your transactions or does it actually pull the data automatically? I've got hundreds of purchases over the years and the thought of entering all that data makes me want to just accept whatever tax hit comes my way.

It works great with multiple brokerages! I had accounts with Schwab and Robinhood, and I just uploaded statements from both. The system reconciled everything and gave me a consolidated view of my holdings across accounts. For transaction imports, it can directly connect to most major brokerages to pull your data automatically. I didn't have to manually enter anything - just authenticated my accounts through their secure connection and it imported several years of transaction history. For brokerages without direct connections, you can upload CSV files or statements and it extracts the data automatically. Saved me hours of spreadsheet work!

How does that even work? Do they just call the IRS and then somehow transfer the call to you? I find it hard to believe the IRS would be okay with a third party service like that.

Sounds too good to be true. I've spent DAYS trying to get through to the IRS about capital gains issues. What's the catch? How much does this service cost? There's gotta be a downside.

They use a call system that maintains your place in line and then connects you when an agent answers. It's not a transfer - they're just holding your spot in the queue. When an agent answers, their system calls you and connects the calls together. The IRS doesn't even know a service was involved - to them, it's just a regular call. There's no catch - it just solves the hold time problem. I was also skeptical before using it! The system just monitors the hold music and waits for a human voice, then immediately calls you. What impressed me was how quickly I got through compared to my previous attempts. They don't answer questions for you or anything like that - they just solve the hold time problem so you can talk directly with the IRS yourself.

Does this strategy still work if some of your highest cost shares were purchased less than a year ago? Wouldn't you end up paying the higher short-term capital gains rate?

You've identified the key tradeoff with the highest cost method. Yes, if your highest cost shares are recent purchases (under one year), you would potentially be looking at short-term capital gains rates, which are higher than long-term rates. This is where tax planning gets strategic. Sometimes taking a smaller gain at short-term rates is still better than taking a larger gain at long-term rates. It depends on your overall tax situation. For example, if your highest cost shares are actually at a loss or tiny gain, the short-term vs long-term distinction matters less. There's also the consideration of harvesting losses to offset other gains.

Your 1099-B should have detailed information about each sale, including date acquired and cost basis. If you're using tax software, you'll need to enter each lot separately rather than just the summary. If your broker didn't properly report the cost basis to the IRS, you'll need to file Form 8949 with your detailed records of which specific shares were sold. I learned this the hard way after getting a notice from the IRS. Make sure to keep all your transaction confirmations showing which specific lots you sold!

This is incredibly helpful, especially the point about checking broker default settings! I had no idea that was even a thing. I've been using Schwab for years and just assumed they would ask me which shares to sell each time, but I bet they've been using FIFO this whole time without me realizing it. The wash sale rule tip is also something I hadn't considered - I was actually thinking about selling some of my underperforming positions and then buying them back after the market dips more. Good thing I saw this before making that mistake! Do you happen to know if the 30-day rule applies to both before AND after the sale, or just after?

The wash sale rule applies both 30 days before AND 30 days after the sale - so it's actually a 61-day window total! If you buy the same security within 30 days before or after selling it at a loss, the loss gets disallowed. For example, if you sell VOO at a loss on January 15th, you can't buy VOO again until February 15th (30 days later) if you want to claim that loss. But it also means if you bought VOO on December 20th and then sell it at a loss on January 10th, that loss would also be disallowed because the purchase was within 30 days before the sale. The tricky part is that "substantially identical securities" can include similar ETFs. So selling VOO and buying VTI might still trigger the wash sale rule since they're both broad market index funds, though this gets into a gray area that you'd want to discuss with a tax professional. Definitely check those Schwab default settings! Most people are surprised to learn they've been using FIFO without realizing it.

This is exactly what I needed to know! I've been manually selecting lots for every trade and it's been exhausting trying to remember which strategy to use each time. The tax-optimized setting sounds like a perfect middle ground between the basic FIFO method and having to micromanage every single transaction. Do you know if this automatic tax-efficient method takes into account the long-term vs short-term capital gains timing? Like, will it prioritize selling long-term holdings over short-term ones even if the short-term shares have a higher cost basis? I'm trying to avoid short-term capital gains as much as possible since I'm in a higher tax bracket this year.

Great question about the long-term vs short-term prioritization! Most tax-optimized methods do consider the holding period, but the exact algorithm varies by broker. Generally, they'll try to balance minimizing gains with maximizing long-term capital gains treatment. From my experience with Fidelity's tax-optimized method, it tends to prioritize this way: 1) Shares held at a loss (regardless of holding period, since losses offset gains), 2) Long-term shares with smallest gains, 3) Short-term shares only if necessary. But you should definitely check with your specific broker about their methodology. That said, if you're in a high tax bracket and want to completely avoid short-term gains, you might still want to manually select lots for larger trades or set up alerts when you're selling positions that include recent purchases. The automatic method is great for simplifying routine rebalancing, but for major sales where the tax impact is significant, manual selection gives you more control. You can always change the method back to "specific identification" for individual trades even if your account default is set to tax-optimized.

This is such an important point about dividend reinvestment! I had no idea that each dividend creates a separate tax lot. I've been reinvesting dividends in my SCHD and VYM positions for about 3 years now, so I probably have a ton of these micro-lots that I'm completely unaware of. This actually explains why my brokerage statement looks so complicated when I try to view my cost basis details. I thought it was just a display issue, but now I realize each of those tiny entries represents a separate dividend reinvestment purchase. Does this mean I should consider turning off automatic dividend reinvestment to keep things simpler? Or are the tax benefits of having more lots to choose from worth the added complexity? I'm wondering if having all these small dividend reinvestment lots actually gives me more flexibility when it comes to tax-loss harvesting and specific identification strategies.

Having more lots from dividend reinvestment actually gives you MORE flexibility, not less! Each dividend reinvestment creates a separate cost basis, and over time some of these might be at gains while others could be at losses (depending on when the dividends were reinvested relative to market movements). I wouldn't recommend turning off dividend reinvestment just to simplify tax reporting. The compounding effect of reinvesting dividends is too valuable to give up for administrative convenience. Plus, most modern brokerage platforms and tax software handle these multiple lots automatically. The real benefit comes during tax-loss harvesting season or when you need to strategically realize gains. Having dozens of small lots gives you much more granular control over your tax liability. For example, you might be able to sell just the dividend reinvestment lots that are at a loss while keeping your main purchases that have larger gains. If you're using a tax-optimized cost basis method or tools like the ones mentioned earlier in this thread, they'll automatically factor in all these dividend lots when determining the most tax-efficient shares to sell. The complexity is mostly behind the scenes - you get the benefit without having to manually track everything.