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I want to cash in my stock to purchase a house. Do I have to pay tax on it?
ANSWER
Expert Michael Lim's Answer:
Whether you pay tax on the sale of stock depends on whether you have a gain or a loss on the sale of that stock. If you sell the stock for more than you purchased it for, you have a gain, and you will pay tax on that gain.
The gain on the sale of stock is called a capital gain. If you have held the stock for longer than 1 year, it is considered a long term capital gain, and it is taxed at 15%. If you have held the stock for less than one year, it is considered a short term capital gain, and it is taxed at your marginal tax rate.
However, if you sell the stock for less than you purchased it for, you have a capital loss. You do not pay taxes on a capital loss; rather, you can deduct up to $3,000 of this capital loss a year against your income.
In any case, you will receive a 1099-B for the proceeds of the sale of stock in the year of sale. Just make sure you keep accurate records as to your purchase price, and report the gain or loss on your Schedule D of Form 1040.
