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Let's say that I bought a stock in August 2018 and sell it in February 2019 for a profit, do I have to pay capital gain taxes for this stock when I file my taxes in 2019?

The reason I asked is because if I understand correctly, the capital gain taxes that I will pay in 2019 tax season will only reflect profits realized in 2018. So since I did not sell the stock until year 2019, I did not realize my profits until 2019, and I won't have to pay capital gain taxes for that until year 2020.

Am I correct?

p.s. Assume that the stock I mentioned above is not in a retirement account and the stock has no dividend.

  • Dupe money.stackexchange.com/questions/95767/… plus several more linked there (by me). PS: if you don't already know, in US gains on an investment held over a year are 'long-term' and taxed at lower rates. Don't let the tax tail wag the investment dog, but at the margin if you have a choice when to take a gain doing so after a year is better. – dave_thompson_085 Aug 26 '18 at 23:01
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You are correct, you are taxed on realized capital gain, and in your example you wouldn't realize the gain until 2019, so that would be reflected on your 2019 tax return, which will be filed in 2020. However, the IRS uses a pay as you earn approach, so depending on the amount of gain, you may need to pay estimated taxes in the quarter the gain was realized. There can be penalties if you don't pay enough throughout the year. There are calculators available to help you determine if this would be necessary and a number of questions related to under-payment penalties.

Typically we use tax years, i.e. "my 2019 return" is my tax return for tax year 2019 rather than the return I file in 2019 (which was my 2018 return) to help avoid year confusion.

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