When do I need to pay taxes on stocks I sold? $4k withdrawal question
Hey everyone! So I'm pretty new to investing and had a quick tax question. I pulled about $4,000 out of my brokerage account earlier this year after selling some stocks I only held for like 6 months. I know that's probably considered "short term" for tax purposes. I'm trying to figure out if I even need to pay taxes on this amount and if so, what percentage am I looking at? I've heard different things from friends about thresholds where you don't have to report smaller investment gains, but wanted to get some clarity from people who actually know what they're talking about. This is my first time having to deal with investment taxes so I'm pretty clueless about the whole process. Any help would be super appreciated!
20 comments
Join the conversation
Angelica Smith
The short answer is that any profit (capital gain) you made on those stocks is taxable, regardless of the amount. There's no minimum threshold where you don't have to report capital gains. What matters is the difference between what you paid for the stocks (your cost basis) and what you sold them for. That's your actual gain - not the $4,000 withdrawal itself. For example, if you originally invested $3,500 and sold for $4,000, your taxable gain would be $500. Since you held the stocks for less than a year, they're considered short-term capital gains, which are taxed at your ordinary income tax rate (the same rate as your wages). This could range from 10% to 37% depending on your income bracket. Your brokerage should provide you with a Form 1099-B in January/February showing your proceeds and cost basis, which makes reporting this on your tax return much easier.
0 coins
Logan Greenburg
•Thanks for the explanation! Quick question - what if some of my stocks actually lost money? Do those losses offset the gains when calculating what I owe?
0 coins
Angelica Smith
•Yes, your losses will offset your gains. If you sold some stocks at a profit and others at a loss in the same tax year, you'll only pay tax on the net gain. For example, if you had $700 in gains but $300 in losses, you'd only be taxed on the net gain of $400. If your total losses exceed your gains, you can deduct up to $3,000 of those net losses against your other income. Any unused losses can be carried forward to future tax years.
0 coins
Charlotte Jones
I was in a similar situation last year with some stock trades and was totally confused about how to handle it on my taxes. I ended up using taxr.ai (https://taxr.ai) to analyze my trading history and it was super helpful. The tool basically looked at all my transactions and sorted out my short-term vs long-term gains, calculated my actual tax liability, and explained exactly what forms I needed. Saved me so much headache especially since my brokerage's 1099 was confusing as heck. For someone new to investment taxes like you mentioned, it might be worth checking out.
0 coins
Lucas Bey
•Does it work with different brokerages? I have accounts with both Fidelity and Robinhood and reconciling everything is a nightmare.
0 coins
Harper Thompson
•I've heard about these tax tools but always wondered if they're actually worth it. Can it handle more complicated situations like wash sales or crypto trades?
0 coins
Charlotte Jones
•It works with basically all the major brokerages - I used it with TD Ameritrade and Webull without any problems. You can either upload the tax documents or connect your accounts directly, which makes it pretty seamless. As for complicated situations, it definitely handles wash sales - that was actually one of my issues last year when I kept trading the same stocks. It also covers crypto trades, although I haven't personally used that feature. The analysis breaks everything down by transaction and flags any potential issues that might need special attention.
0 coins
Harper Thompson
Just wanted to follow up about my experience with taxr.ai after our conversation here. I decided to give it a try with my messy portfolio (multiple brokerages, lots of trades) and it was seriously eye-opening. The wash sale detection saved me from a major headache - turns out I had several I didn't realize would affect my taxes. The breakdown of short vs long term gains made it super clear what I was going to owe, and the visualization of how different trades affected my tax situation was actually kind of fascinating. Definitely using it again next year!
0 coins
Caleb Stark
If you're having trouble getting answers from the IRS about your investment tax questions (which I definitely was), I found this service called Claimyr (https://claimyr.com) that actually got me through to a real person at the IRS in about 15 minutes. There's a video showing how it works here: https://youtu.be/_kiP6q8DX5c I had some specific questions about reporting stock sales from multiple brokerages that weren't covered in any of the standard IRS publications, and getting an actual agent on the phone cleared everything up. Way better than waiting on hold for 3+ hours like I did last year.
0 coins
Jade O'Malley
•Wait how does this actually work? Does it just call the IRS for you or something? I've literally never been able to get through to them.
0 coins
Hunter Edmunds
•Sounds too good to be true. I've tried calling the IRS multiple times this year and just gave up after endless holds. Are you sure this isn't just another scam?
0 coins
Caleb Stark
•It essentially holds your place in line with the IRS and calls you back when an agent is about to be available. So instead of you waiting on hold for hours, their system does it for you. When they're about to connect, you get a call letting you know an agent is ready. It's definitely not a scam - I was super skeptical too. That's why I watched the video demo first. What happens is you still talk directly to the IRS yourself, the service just handles the waiting part. I had specific questions about cost basis that weren't covered in the standard forms, and the agent walked me through exactly how to report it. Totally worth it for the peace of mind.
0 coins
Hunter Edmunds
I'm actually eating crow right now. After being super skeptical about Claimyr, I broke down and tried it yesterday after spending 2 hours on hold and getting disconnected AGAIN. It actually worked exactly as described - I got a call back in about 45 minutes telling me they were connecting me to an agent. The IRS agent I spoke with gave me specific guidance on reporting my stock sales where my brokerage didn't provide cost basis info. Turns out I was overthinking it. They were super helpful once I actually got through to someone. Never would have gotten this resolved without actually speaking to someone.
0 coins
Ella Lewis
Just a heads up that even if your brokerage doesn't send you a 1099 (some don't if your gains are below $600), you STILL have to report and pay taxes on any profits. The IRS does not care about the dollar amount - all capital gains are technically taxable. I found this out the hard way a few years ago. The $600 threshold is just for when brokerages are required to send you forms, not for when you have to pay taxes.
0 coins
Andrew Pinnock
•Do you know if this is the same for crypto? I sold some Bitcoin for like $200 profit and didn't get any tax forms.
0 coins
Ella Lewis
•Yes, exactly the same for crypto. Any profit from selling crypto is taxable as a capital gain, regardless of amount. The $200 profit would be a short-term capital gain if you held it less than a year, and taxed at your ordinary income rate. Most crypto exchanges won't send you a 1099 unless it's a large amount, but you're still legally required to report it. The IRS has been cracking down on crypto reporting the last few years, so it's definitely better to report even small amounts.
0 coins
Brianna Schmidt
Just to add another wrinkle - if your $4000 withdrawal included any dividends from those stocks (not just capital gains from selling), those are taxed differently. Qualified dividends get favorable tax rates similar to long-term capital gains, while non-qualified dividends are taxed at your ordinary income rate. Your 1099-DIV from the brokerage should break this down for you. Just something else to be aware of!
0 coins
Sophia Long
•Thanks for bringing this up! I actually did receive about $120 in dividends before I sold everything. I didn't even think about those being taxed differently. Would those show up on the same form as the stock sales or is it a separate document altogether?
0 coins
Brianna Schmidt
•You'll typically get two separate forms - a 1099-DIV for the dividends and a 1099-B for the stock sales. Some brokerages combine them into a consolidated 1099 package, but they'll still show as separate sections. The 1099-DIV will break down which dividends are "qualified" (better tax rate) versus ordinary. Most common stock dividends from U.S. companies are qualified if you held the stock for at least 60 days, but there are exceptions. The form will do this categorization for you, so you don't have to figure it out yourself.
0 coins
Taylor Chen
This is all really helpful information! I'm in a similar boat as Sophia - first time dealing with investment taxes and feeling pretty overwhelmed. One thing I'm still confused about is the timeline. Since I sold stocks earlier this year, do I need to pay estimated quarterly taxes on those gains, or can I just wait until I file my regular tax return next year? I keep hearing conflicting things about whether you need to make estimated payments if you have capital gains, especially if it's your first time having investment income. Don't want to get hit with penalties if I'm supposed to be paying something now!
0 coins