How do you calculate capital gain tax when selling a portion of your stock portfolio?

The good news is you don't pay tax on your entire withdrawal - only on the gain portion! When you sell a portion of your stock holdings, you need to determine what's called your "cost basis" for the shares you're selling. There are several methods to calculate this when you've purchased shares over time: First-In-First-Out (FIFO): This assumes you're selling your oldest shares first. If your earliest purchases were at lower prices, this might result in more capital gains. Specific Identification: You can choose exactly which shares to sell. This gives you the most control for tax planning - you could sell your highest-cost shares to minimize gains. Average Cost: This is commonly used for mutual funds - you take the average cost of all your shares. Most brokerages will calculate this for you and provide the information on your 1099-B tax form. The difference between your cost basis and the selling price is your capital gain, and that's what you'll pay tax on. Also important - if you've held these shares longer than a year, you'll pay the lower long-term capital gains tax rate rather than the higher short-term rate (which is the same as ordinary income).

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Don't forget that if you've held the stock for more than a year, you qualify for the lower long-term capital gains rates (0%, 15%, or 20% depending on your income bracket) instead of short-term rates that are taxed like regular income. Makes a HUGE difference!

Has anyone used TurboTax for reporting stock sales with multiple lots? I'm worried it might not handle the specific identification method correctly and I don't want to overpay my taxes.

Great question! I went through something very similar last year. One important thing to keep in mind is that your brokerage should provide you with a 1099-B form that shows the cost basis for the shares you sold, but it's always good to understand how it works. Since you've been investing since 2013, most of your shares will likely qualify for long-term capital gains treatment (which is much better tax-wise). The key is tracking your cost basis correctly - if your brokerage doesn't have complete records from your earlier purchases, you might need to reconstruct them from your own records. Also, don't forget to consider any dividend reinvestments you might have had over the years - those create additional small purchases that increase your cost basis. Many people overlook this and end up overpaying their taxes. One last tip: if you're doing the calculations manually, keep detailed records of which specific shares you're selling. The IRS requires consistency, so whatever method you choose (FIFO, specific ID, etc.), you need to stick with it for that security going forward.