Do I need to pay estimated taxes on long-term capital gains if no other income?

Forum|Forum|1 year ago
January 17, 2025
2 replies
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Starting in 2025.... Single, No dependents, Renter, Unemployed.

I plan to sell shares of stock with long-term gain status to provide monthly income, until I find employment again.

It appears if my total income (via gains) is less than or equal to $48,350 I would not need to pay estimated taxes since my tax liability is zero(?). I also live in a state with no state income tax or gains tax. (I also have some marginal dividends from other accounts, and will take it into consideration).

Questions...

1. Do I need to pay estimated taxes in the above scenario?

2. Can I also consider the 2025 standard deduction of $15,000 will then allow gains up to $63,350 and pay no taxes?

Open to any other thoughts on this. Thank you.

References:

https://www.bankrate.com/investing/long-term-capital-gains-tax/#what-is-the-long-term-capital-gains-tax-rate

https://turbotax.intuit.com/tax-tips/small-business-taxes/estimated-taxes-how-to-determine-what-to-pay-and-when/L3OPIbJNw

fanfare

Employee

"It appears if my total income (via gains) is less than or equal to $48,350 I would not need to pay estimated taxes since my tax liability is zero(?). "

No.

Was your 2024 federal tax Zero?

if so, you don't have to pay 2025 Estimated tax; there will not be a penalty.

@Helper82468ASD

fanfare

Employee

With capital gains of about 48,000, why do you think your tax will be zero?

@Helper82468ASD

Helper82468ASDAuthor

@fanfare wrote:
With capital gains of about 48,000, why do you think your tax will be zero?

@Helper82468ASD

The capital gains tax table for 2025 shows $0 tax owed for (long-term) gains up to $48,350.00. Therefore, I gather if my long-term capital gains is under this value then I owe no taxes. I certainly will pay estimated taxes if I am supposed to.

For... "Was your 2024 federal tax Zero? if so, you don't have to pay 2025 Estimated tax; there will not be a penalty."

No. I have 2024 federal taxes from employment and other items. I will have to make a tax payment in April as well.

Planning to consult a tax person as I have other questions as well. Thank you.

AmyC

Employee

1. You may or may not be required to pay estimated tax as Fanfare states above. However, the IRS philosophy is that estimated taxes should be paid when you make money. If you owe over $5,000, that is considered a substantial underpayment. You may get a great job and withholding the extra tax from your paycheck could rectify the situation.

2. No. Take a look at the sch D tax worksheet and you will see the hard numbers.

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Helper82468ASDAuthor

Ok. thanks @AmyC I am essentially taking a career break and using this time to build skills in a new area of software engineering, but it will take some time to build enough skill to interview. I may need to consult a career counselor in addition to a tax person on some other tax questions.

I may take employment earlier in my current skill area as I would otherwise miss out on significant retirement savings (401K, IRA, etc.). I will see how it goes 😟. I did use extra tax withholdings the past few years as well.

DianeW777

You are correct if your only income is from capital gains using the single filing status (higher for head of household or married filing jointly).

If you do end up taking a job, then be sure to have the correct withholding on your W-4. Either way, the capital gains, assuming long term holding period will receive the special tax treatment of 0% at or below $48.350.

@Helper82468ASD

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