When you buy a stock, you hope that the price rises and you make a profit. But when you do have a gain in your stock portfolio, you must pay taxes on the money you make. When you sell a stock in your portfolio, you need to calculate the amount of money you made. If you overstate your capital gain, you will end up paying more taxes than you really owe. But if you understate your profit, you could face trouble from the IRS.
Look up the original purchase price of the stock. The brokerage firm you purchased the stock from can supply you with this information.
Add the amount of the commission you paid when you bought the stock. This information should be included on your purchase confirmation.
Find the annual dividend statements you received from your brokerage firm. If the stock pays a dividend, you should have received a 1099-DIV form each year you held the stock, and you should have paid taxes on those dividends.
Add those dividend payments to the original purchase price of the stock and the brokerage commission. For instance, if you paid $2,000 for the stock, paid a $10 brokerage fee and earned $190 in dividends, your total cost basis is $2,200.
Subtract the total cost basis calculated in Step 4 from the proceeds of the stock sale. You can find that figure on the sales confirmation you received when you sold the stock.
Determine whether you have a short- or long-term capital gain. If you held the stock for a year or less, you have a short-term gain, and you pay taxes on that gain at your ordinary income tax rate. If you held the stock for longer than a year, you have a long-term gain, which as of 2011 carries a maximum tax rate of 15 percent. You can find the relevant dates on your purchase and sale confirmations.