I bought some shares of FXI and sold it for a profit of about $300. How much should I save for taxes?

Question

My profit was about $300. My income YTD is only about $1500 (full time student). Must I save some of my profit to pay to the IRS next year? If so, how much?

Answer 1

If that's your total income for the year, no tax will be due. You should file a return, however, and include the details of the stock sale on Schedule D. The IRS only gets the data on the gross proceeds from the sale and will assume that your basis was $0 if you don't file a return.

If your income exceeds the filing status amount for the year (probably $5,350 if your claimed as a dependent by your parents) then the gain will be taxable. How much the tax will be will depend upon how long you held the shares.

If you held them for over 1 year they're taxed at the long term capital gains rate. That rate is normally 15% unless your marginal rate is already 15% or lower. In that case, the tax is 5%. With your income level, if it's taxable it will probably be at the 5% rate unless you come into a serious windfall by the end of the year.

If you held the shares for one year or less, the gain is taxed at your marginal rate. In your case, that won't be much -- most likely 10% or 15%.

Answer 2

You will owe very little (less than $30) or no tax. If you are a dependent, which appears to be the case, your standard deduction is your earned income plus $300. If you made $300 or more on the stock, you must file a tax return.

Report the stock trade on Form 1040 Schedule D. Even if you made less than $300, you should still file a tax return to inform the IRS of the basis of your stock. That is the only way the IRS will know, and you don't want a letter from them asking for tax on the entire sales price.

Answer 3

No, your income will be below the amount where you have to pay any tax. But file a return showing the stock sale on a schedule D - otherwise you could end up with a flurry of paperwork from the IRS, and while you still wouldn't end up owing anything, who wants to do extra paperwork?