So I am married, I earn 70k a year, my husband has been unemployed for the past year. Due to some weird error out of our control that I won’t get into in the post, my husband’s investments were liquidated, roughly 130k total (he’s had these investments unchanged for several years)
I understand that we won’t need to pay federal taxes, but I don’t quite understand what the state and/or city taxes will cost us. We want to invest this money anyway, so if the taxes are low it might be worth diversifying, since the investments were a gift of stocks from a single company. But if we have to pay a significant amount we would just demand that the company responsible for this error buy back exactly what we had, which should allow us to avoid paying taxes entirely (I think, not really sure)
If someone could explain to me how this works I would really appreciate it!
trying to understand capital gains taxes in nyc
byu/cigarettehaze intax
Posted by cigarettehaze
7 Comments
I’m not sure why you think you won’t need to pay federal taxes? Was everything sold at a loss? Because if there was gain above a certain amount, you might need to pay long term capital gains at the federal level as well.
buying it back is not going to defer the tax on the gains
assuming there was a viable claim against a company that sold the stock without your approval, any action you have would be against them. you probably wouldn’t get far with that
Why do you say you won’t owe federal taxes? If it’s because you think you’re in the 0% bracket, you should be aware that that bracket runs out after you have enough LTCG to fill it up, so you may owe 15% on some gains.
But the other question is: how much of that 130k is actual gains? Was that the total of the gains, or the total of the whole amount? You wouldn’t pay taxes on the basis (the amount originally contributed).
I suggest running your 2024 tax return adding in the capital gains and look how much the NYS and NYC tax increases over the filed return and then you have your answer.
First of all, you need to clarify what the actual gain is, not what you sold the stock for. It is not clear that you would owe zero tax on those capital gains, and even if you did come under the zero capital gain bracket for federal purposes, New York may have different rules.
If you liquidated investments, you could have a capital gain if your basis in the investments is less than what you sold it for. For instance, if you invested 70K, you would have a capital gain of 60K if you sold for 130K. You have to pay Federal income tax on this, and there could be a 10% penalty if it is a tax-advantaged account (like a 401K or traditional IRA).
Much depends on the type of asset. To get a better answer, you need to provide the type of account (401k/IRA, or similar account; or a normal brokerage; or bank account), plus the type of investment sold (stock, bond, collectible, or precious metal or mineral), and the original purchase and sale price, and if the asset has had any return of capital distributions (rare, but can happen with REITs or other partnerships), and if the sale was considered an IRA distribution.
Assets in a 401k/IRA are generally not taxes at the Federal, State, or local level, with some minor exceptions like collectibles or precious metals or minerals. Only distributions are taxed, and a 1099 is issued, which is taxable at all levels.
If it was in a normal account, there will be a 1099B with separated copies for federal, state, and local, and it’s taxable by all 3 levels based on the difference in what the asset was worth when bought and sold. Usually, the monthly or quarterly statements will show what happened. It is definitely taxed at the Federal level, even if the tax rate is zero for some of the gain.
If the asset was in an IRA and mistakenly not put in an IRA, the institution can fix it. As an example, I’m my mom’s PoA. She had an IRA in an account earning little interest. I, as her PoA, used that money to buy a CD. Because I signed the account as her PoA, someone somehow put the CD in my name and out of her IRA. It took several weeks, but they were able to put the CD in her name, and back in the IRA. If it’s all done in the same tax year, it’s much easier. Otherwise, they may have considered this a distribution, which would have been taxable at all three levels.
If the asset was a NYC bond, any capital gain or loss is still reported to all three entities, even if dividends were federally tax free. The capital gain here is primarily based on changes of interest rates and issuer risk rating changes between when it was purchased and sold, as that affects the bond price. The original coupon rate, purchase price, and sale price affect the gain.