Members of the Maryland Association of Certified Public Accountants are answering readers' tax questions through April 15.
What are the short- and long-term capital gains rates when selling stock? In addition, if you sell stock and realize a capital gain, when is tax required to be paid on that capital gain, quarterly or immediately?
Substantial changes have occurred in this area. Effective last year, the top federal long- term capital gain rate on a stock sale has been reduced to 20 percent. In some cases it can be as low as 10 percent. The new capital gains rates apply for assets held more than 12 months (not including collectibles, "small business stock" or 1250 real property subject to depreciation, which are all taxed at higher rates).
Short-term capital gains are treated as ordinary income and can be taxed as high as 39.6 percent. Maryland has no special tax rules for capital gains; they are taxed at the same rate as all other income. Generally, you can pay the tax on capital gains through a quarterly estimate in the quarter in which you recognized the gain. In some cases you may be able to wait until you file your tax return to pay the tax on the gain.
Bernard Leibtag, CPA, Schiller, Holinsky & Gardyn, P.A.
The above advice is for general purposes only and is not intended as legal, accounting or tax advice. Specific situations may vary.
To ask a tax question, call Sundial, The Sun's telephone information service, at 410-783-1800. Call 410-268-7736 in Anne Arundel County, 410-836-5028 in Harford County, 410-848-0338 in Carroll County. Using a Touch-Tone phone, punch in the four-digit code 6225 after the greeting. You can also submit questions by e-mail through The Sun's Web site: www.sunspot.net. Click on Business.
Selected questions will be answered in the Business section. No questions will be answered personally.
Pub Date: 2/13/99