- 1). Identify the exact date when you purchased the stock you wish to sell. Determine if the time elapsed since that date is less than or greater than a period of one year.
- 2). Identify the profit or loss currently achieved by the stock investment. Usually, if the stock's current price is above its purchase price, this is a profitable holding. Otherwise, the investment is an unrealized loss. If the current price is nearly the same, the role of commission costs incurred during its purchase may affect whether it is an overall gain or loss. Most brokers automatically incorporate commission fees when displaying the profit/loss information in your account.
- 3). Sell the stock if it is a losing position and you have held the stock for less than one year. This will affect your overall short-term profit or loss scenario. Short-term capital gains are usually taxed at your marginal income tax rate, up to 28 percent. The sale of a losing position will offset any short-term gains you may have previously realized, thus minimizing your taxes for these holdings.
- 4). Hold the stock until it becomes a long-term investment if the position is profitable. If you have held the stock for 10 months, for example, it may be to your advantage to wait another two months before selling it. Capital gains from investments over one year duration are taxed at a lower rate than short-term gains. At most this is usually 15 percent, however economic circumstances in the years 2008 to 2010 reduced this to zero percent for many investors.
- 5). Sell a losing position at any time you choose if it is already a long-term investment. The sale will be a long-term capital loss subtracted from your long-term capital gains. This will reduce income taxes on other capital gains you may have earned.
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