- 1). Calculate your gains. Your account statement most likely lists your year-to-date realized gains and losses, but if not, contact your financial representative, or consult your own records. To calculate your own gains, take the proceeds you received from the stock sale and subtract the amount you paid for the stock.
- 2). Analyze your losses. Look at your account and determine which securities are trading at losses, and for how large. These are the stocks that you should consider selling. If you have bought a stock more than once, you will have different purchase prices and gain or loss figures, so while your overall stock position may show a loss, you may have a tax lot at a gain. Make sure to sell only those lots at losses. Bear in mind that just because you have a loss in a security doesn't mean you should sell it for tax purposes--you should also make an investment determination of whether the stock still matches your investment goals.
- 3). Check tax returns from previous years. If you took excess losses in previous tax years, you are allowed to carry those losses over into future years. If you have a carryover from prior years, you can use that loss in the current year without selling any additional stock.
- 4). Match your gains and losses. Once you have your gains and losses calculated, match up the stock lots that will generate enough losses to offset your gains, and sell the stocks. Remember that if you take excess losses, from the current or previous tax years, you can use up to $3,000 of additional realized losses to offset ordinary income.
- 5). File your taxes. Use Schedule D of Form 1040 to list your capital gains and losses. Make sure to separate your transactions into short-term, held one year or shorter, and long-term, held over a year. Enter any carryover losses onto Line 6 of Schedule D if they are short-term, or Line 14 if they are long-term. Once you have computed your total gain or loss, enter that amount on Line 13 of your federal Form 1040.
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