Will You Owe Tax on Your Gamestop Gains?

Yes, you will probably owe tax on the gain from selling your GameStop shares.

When is Tax Owed on the Gain from the Increase in Value of a Stock?

Tax will likely be triggered at the time that you sell your GameStop shares at a gain.  No tax is owed from holding stock with a gain. The tax is only triggered when the stock is sold.  If you sell your shares at a loss, you will not owe tax – but might be able to use any losses against income from other sources.

How is the Tax on Sale of Game Stop Stock Calculated?

Gain is calculated based on the amount for which the stock was purchased and the amount received on the sale.  This is known as the taxable gain.  The amount of the taxable gain is added to your other sources of income to determine which tax bracket you are in.

Long Term v. Short Term Gains

Long term capital gains receive better tax treatment than a short term capital gain.  An asset held for more than one year is entitled to long term capital gains treatment, while an asset held for a shorter period of time is a short term capital gain.  For investors with a variety of short and long term gains and losses, there are rules that allow “netting” of gains and losses, to reduce the overall tax burden.

Tax on Short Term Capital Gains

Short term taxable gains are taxed as ordinary income, with tax payable at the standard income tax rates.  The short term capital gains (net of short term capital losses) are added to the income earned from other sources and taxed.  The tax brackets vary, depending on whether the taxpayer is married or single.

Tax Charts

The tax charts show the tax liability for taxable income.  The taxable gain from the sale of any stock is added to your other income, and then all sources of income are taxed according to  the following tables.  Taxable income is determined after consideration of various deductions and exemptions to which you might be entitled.

Tax Rate for Single Taxpayers, For Short Term Capital Gains

Tax

Bracket

Tax

10%

$0 to $9,950

10% of taxable income

12%

$9,951 to $40,525

$995 plus 12% of the amount over $9,950

22%

$40,526 to $86,375

$4,664 plus 22% of the amount over $40,525

24%

$86,376 to $164,925

$14,751 plus 24% of the amount over $86,375

32%

$164,926 to $209,425

$33,603 plus 32% of the amount over $164,925

35%

$209,426 to $523,600

$47,843 plus 35% of the amount over $209,425

37%

$523,601 or more

$157,804.25 plus 37% of the amount over $523,600

 

Tax Rate for Married Taxpayers, For Short Term Capital Gains

Rate

Bracket

Tax

10%

$0 to $19,900

10% of taxable income

12%

$19,901 to $81,050

$1,990 plus 12% of the amount over $19,900

22%

$81,051 to $172,750

$9,328 plus 22% of the amount over $81,050

24%

$172,751 to $329,850

$29,502 plus 24% of the amount over $172,750

32%

$329,851 to $418,850

$67,206 plus 32% of the amount over $329,850

35%

$418,851 to $628,300

$95,686 plus 35% of the amount over $418,850

37%

$628,301 or more

$168,993.50 plus 37% of the amount over $628,300

 

Tax Rates for Single Taxpayers, Long Term Capital Gains

Rate

Taxable Income From All Sources

0%

$0 to $40,000

15%

$40,001 to $441,450

20%

$441,451 or more

 

Tax Rates for Married Taxpayers, Long Term Capital Gains

Rate

Taxable Income From All Sources

0%

$0 to $80,000

15%

$80,001 to $496,600

20%

$496,601 or more

Tax on Net Investment Income

On top of regular tax, there is an additional 3.8% surtax on net investment income that is due if your taxable income exceeds certain thresholds.  Net investment income includes income from many sources other than wage income, and includes interest, dividends, gains, rents, annuities and royalties.  The threshold for single taxpayers is $200,000, and $250,000 for married filers.

State Taxes

In addition to federal income taxes, if you live in a state that charges a state income tax, you might also owe tax to that state on your GameStop gains.  The rates very considerably by your state and tax bracket.  The top tax rate for California is 13%, New York’s rate is around 8.8%, and new Jersey’s is over 10%.

Tax Complexity

Everyone’s tax situation is different, and only by actually filling out a tax return can you know how much tax you might owe on your GameStop gains.  For example, if you have capital losses that went unused in a prior year, those could be applied to the current year to offset some of the gain from selling GameStop stock in 2021.

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