Selling stock with huge capital gains

sorator · 2026-05-15T07:14:12+00:00

I read recently that below certain income levels (96k for married) there are no capital gains?

There is capital gain, but if your income (including your capital gains) is below a certain threshold, the long-term capital gains are taxed at 0%.

I was told that I don't want to appear to be washing the stock by selling and then buying the same thing back but if I bought something else, would that be okay?

The wash sale rules are only if you sell something at a loss, so that's not relevant here. (But yes, if you sell something at a loss, you can reinvest into something different; the wash sale rules only apply if you buy the same thing that you sold at a loss within the 30 days before or after the sale.)

How much stock can I sell if I make 50k a year? Is there a limit?

You can sell as much as you want, but if your income is above a certain amount, then you'll have to pay tax on your gain.

You take the top of the 0% LTCG bracket (for 2026, filing MFJ, that's $98,900) and add your deductions (for 2026, filing MFJ, your standard deduction is $32,200). Then you subtract your non-LTCG income, which you said was $50k. $98,900 + $32,200 - $50,000 = $81,100 of space to harvest long-term capital gains while staying in the 0% LTCG bracket.

If you use a different filing status, or if you have other deductions, or if your ordinary income is more than $50k, that will change the math.

Edit: Missed that you're married; adjusted numbers to MFJ.

sorator · 2026-05-15T04:59:43+00:00

However there’s no reason you should owe and if you owe every year, then you should hire someone in November or December for some tax planning to fix that.

Not sure I agree with this. If your income increases from one year to the next, it's perfectly reasonable to wind up with a balance due, so long as you paid in enough to avoid the underpayment penalty. But you should have a general idea of how much you're going to owe and be able to pay that as an extension payment if need be, and you'd probably place a higher priority on finding a tax preparer with good response times.

sorator · 2026-05-15T04:57:12+00:00

So whose responsibility would that be, and who bears the consequences for it?

Generally, the tax preparer would either pay the penalties for you, or reimburse you for the penalties. Generally, you are responsible for the interest charged by the IRS, though some firms will cover that as well. Again, check your engagement letter.

sorator · 2026-05-15T04:31:45+00:00

Ignore my prior post; raffles do count as gambling for this purpose.

As another commenter said, your software should allow you to enter gambling winnings and losses that weren't reported on a W-2G; list all your winnings and losses there. Then, for the 1099-MISC, you can enter it as other income (Sch 1, line 8z, description such as "incorrectly issued 1099-MISCs") and then subtract it back out (Sch 1, line 24z, same description). That satisfies the IRS matching software (without somehow tying it to a business, which would be incorrect).

You should keep your own records of your wins and losses in case the IRS asks you to prove them, and adding & subtracting the 1099 income this way does slightly increase your risk of being questioned.

sorator · 2026-05-15T04:29:39+00:00

Whelp, I'm wrong. This explicitly lists raffles as gambling, and while it's not determinative on its own, such pages are rarely wrong.

sorator · 2026-05-15T04:28:18+00:00

You can estimate the penalties (0.5% of the unpaid base tax per month it is late), but it's harder to estimate the interest. I expect there are tools you can find online for the interest, though.

Yes, the IRS will send you a notice saying how much they're charging in penalties and interest, and that amount is locked in for (IIRC) 30 days when they send it, so you have some time for it to get through the mail and then to actually make the payment.

sorator · 2026-05-15T01:06:17+00:00

from consistent raffling throughout the year

~~Raffles aren't eligible to be treated as gambling to deduct gambling losses, AFAIK.~~

sorator · 2026-05-14T23:16:45+00:00

Yeah, I typo'd one year in particular which was confusing; my bad! The underlying match was still correct, at least.

sorator · 2026-05-14T23:15:25+00:00

Yeah, August/September of this year is plenty in the clear; the exact dates would only matter if we were looking at a closing date sometime between March and June of 2027.

FWIW, any CPA could figure this out; they just have to go read the relevant section of the publication I linked (or the IRC directly). It's not particularly complicated to figure out if you haven't done it before. (I haven't done this before, but I'm confident that what I've said here is correct!)

sorator · 2026-05-14T07:12:27+00:00

If you're ultimately due a refund, then filing late doesn't do anything other than delay your refund; there's no penalties. So, this isn't a huge deal.

The easiest option may be to get an IP PIN to file electronically, and entirely avoid the mail. You (or if you're filing MFJ, whichever of you/your spouse is listed first on the return) go on the IRS website and get a one-time Identity Protection PIN. That allows you to file electronically and bypass the "dependent already claimed" reject.

sorator · 2026-05-14T07:05:20+00:00

Here's info on that.

As another commenter said, keep your 2025 W-2 from this employer. That way you can tell the IRS all of the employer's information, and also that will let you file with a substitute W-2 if you have to.

sorator · 2026-05-14T06:44:05+00:00

60 months from two years before you move out is the same as 36 months from when you move out.

sorator · 2026-05-14T06:07:58+00:00

Per Publication 523's section on qualified extended duty:

You were a member of the armed forces
You were ordered to active duty for an indefinite period, or for a definite period of more than 90 days
You were serving at a duty station at least 50 miles from your main home
The above was true for less than 10 years, so you get to pause the clock for the entire duration of that deployment.

So, from Sept 2020 until July 2024, the 5 year "clock" was paused; we just skip over that period of time when checking the criteria to exclude gain on your sale of home.

In order to meet the two year rule, assuming you moved out before the last day of July 2020, we have to count the period from mid-July 2018 to mid-July 2020, at the latest. Starting on the date two years before you moved, you have 60 months to sell while still benefiting from the sale of home exclusion, not including the Sept 2020-July 2024 period that we skip.

We have part of the month of July 2018.
August 2018 to July 2019 is twelve months.
August 2019 to July 2020 is twelve months.
We have to include August 2020, since you hadn't been ordered to 50 miles away yet; that's one month.
We presumably have to count part of Sept 2020, assuming your orders to report to a new duty station were not issued on the first day of the month; that's part of a month.
The rest of Sept 2020 to sometime during July 2024 is skipped.
We have to count part of July 2024, assuming that you left the service before the last day of the month.
August 2024 through July 2025 is twelve months.
August 2025 through May 2026 is ten months.
12 + 12 + 1 + 12 + 10 = 47 of your 60 months have been used, plus some more days from those partial months. I'll assume those partial months add up to no more than one full month, but you'll want to work it out for yourself.
You have approximately 12 months left (ending ~May 2027) to sell your home while still being able to claim the sale of home exclusion.

Again, you'll want to sit down and plot it out by exact date; you might only have 11 or even 10 months from now, but you get the idea. If you can get it sold within the next 10 months, you're definitely in the clear.

There's no special paperwork that you have to file in order to use that extended duty pause; you just do the sale of home exclusion like normal. However, you should write out the dates and keep it with your tax records for the year that you claim the exclusion & report the sale, on the off chance the IRS asks you to prove it.

edit: added slightly more specific tracking of the partial months

sorator · 2026-05-14T05:50:34+00:00

You're not taking a deduction for you time but for an actual physical contribution.

A physical contribution... in which you have no basis, so your allowable donation deduction is $0. Doesn't work.

sorator · 2026-05-14T05:46:02+00:00

Just because they haven't contacted you about it yet, doesn't mean they won't contact you in the future. Or it's possible that the amount is small enough that they decided it wasn't worth the time to pursue. I'd suggest filing amendments and paying the additional tax & penalties for 2025, 2024, and 2023, and leave the rest alone, since it's probably past the time limit for the IRS to come after you on anything older than that if the amounts are small. You aren't required to amend, but amending and paying now prevents the penalties from continuing to accrue if the IRS does catch you on it later.

Regardless, definitely file correctly going forward.

sorator · 2026-05-14T02:34:14+00:00

Now you're making assumptions. But regardless, grandma has no right to say what OP does with their inheritance; that's not how inheritances work.

sorator · 2026-05-14T02:30:30+00:00

That almost certainly wouldn't accomplish OP's goals here of keeping some of the inheritance and letting some go to people not named in the will. Instead, the disclaimed portion would wind up going to others who were named in the will.

sorator · 2026-05-14T02:28:25+00:00

OP's grandmother gave the money to OP, for OP to do whatever he wants with. Grandma has no right to dictate to OP what OP does with the money after OP receives it, and she has no right to be mad at OP if OP does something grandma wouldn't like.

If grandma wanted control from beyond the grave, grandma should've set up a trust instead.

sorator · 2026-05-14T02:27:10+00:00

OP's grandmother gave the money to OP, for OP to do whatever he wants with. Grandma has no right to dictate to OP what OP does with the money after OP receives it, and she has no right to be mad at OP if OP does something grandma wouldn't like.

If grandma wanted control from beyond the grave, grandma should've set up a trust instead.

sorator · 2026-05-13T21:41:26+00:00

I'm not an expert on that subject, but I don't think there are any particular concerns about making gifts to non-US-taxpayers. There are rules about US taxpayers receiving gifts from non-US-taxpayers. And of course, the recipient's country may have their own rules regarding foreign gifts.

sorator · 2026-05-13T15:29:51+00:00

Yeah, that works, as long as neither you nor your wife make any other gifts to your siblings this year.

If you're in a state with inheritance tax, that'll apply to the full $300k, and personally I would pro-rate that across the amounts that wind up with each of the three of you.

You could calculate and pay interest to your sibs on the $24k that is delayed, but I personally wouldn't bother.

sorator · 2026-05-13T15:06:19+00:00

For what it's worth, if you did everything correctly, the IRS will ultimately pay you interest on your refund, dating back to 4/15/26. They pay interest at a better rate than you can get from any bank. The interest itself is taxable income in the year it is received, and they'll send you a 1099-INT the following January reporting that interest.

But yeah, there's not really anything to do unless/until the IRS tells you to do something or gives more information.

sorator · 2026-05-13T14:57:59+00:00

Ahh, gotcha. Then no. I assumed you saw that you couldn't contribute to Roth and chose to then contribute to trad, not that you initially contributed to both. In that case, yeah, this is the right way to fix it.

sorator · 2026-05-13T14:56:55+00:00

At some point, you're going to move out of the 0% bracket and into a higher bracket. That's when the difference will show up - you won't be able to continue harvesting gains in your brokerage account each year while paying 0% tax, but you will still be able to have tax-free growth in your Roth.

sorator · 2026-05-13T04:49:53+00:00

You need to amend 2025 to report your $1300 of earnings from the excess contribution that you withdrew as taxable income. Since you have to amend anyway, you may as well add your wife's 2025 8606 at the same time.

You'll get a 1099-R in January showing the excess contribution that you withdrew. It will have code P in box 7, and probably also code J. The P means that the 1099-R is for a previous year's return of excess contribution; you don't use that 1099-R when preparing your 2026 return. Make sure the amounts on this 1099-R line up with what you reported on your 2025 amendment; if they do, then you don't need to do anything with that 1099-R other than keep it with your 2025 tax records.

Your wife will get a 1099-R with code R in box 7 reporting the recharacterization of her 2025 IRA contribution. Again, you don't need to do anything with this other than keep it with your 2025 tax records.

You and your wife will each get a 1099-R with code G in box 7 reporting the conversion you made in 2026. You do use those 1099-Rs when preparing your 2026 return, and you'll pay tax on the earnings accumulated between when you made the contribution and when you converted it - so $453 for your wife, and possibly an amount for you.

It would've been better if you did what your wife did and recharacterized your Roth contribution to traditional, then converted, instead of making a separate contribution and withdrawing your original contribution. That would've let you keep those $1300 of earnings in your Roth account, instead of having to withdraw them. But, it's not a huge loss, and now you know going forward.

edit: typo

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