If one is retired without income but incurs capital gains from sales of equity, is tax due at filing next april or are there pre-payment obligations. If so, how does one estimate the amount and submit it?

Nerd Wallet has some decent information.

https://www.nerdwallet.com/tax...gains-tax-calculator

Generally you pay the tax when you file your return, but you can also make 1/4 payments or go ahead and pay the tax when you make the sale, that way it will show paid when you file and reduce any offset against a potential return at that time.

Thanks. So there are no obligations or penalties if I choose to pay taxes when return is filed? Seems like so.

^^^That's not corrrect.

You are supposed to make quarterly estimated payments.

From the IRS:
"Estimated tax payments are generally due:

April 15 for income earned January 1 to March 31
June 15 for income earned April 1 to May 31
September 15 for income earned June 1 to August 31
January 15 of the following year for income earned September 1 to December 31
Note: If these due dates fall on a Saturday, Sunday or legal holiday, the payments are due the next business day."

How much to pay to avoid interest and penalties is 100% of last year's tax liability, 110% if last year's AGI was more than $150,000, or 90% of the current year's tax liability.

Long term capital gains on qualified dividends and stock sales are tax between 0% and 20% with a possible 3.8% net investment income tax on top of the 15% or 20% rate if you have over $200,000 single or $250,000 married filing joint of MAGI.

If you will owe income tax, it must be paid for the quarter in which it was realized. Retired and on social security makes that calculation difficult, because you don't know how much of your social security will be subject to tax, but in theory you would estimate what your owed taxes will be, and then file quarterly.

However, there is one loophole. Texes paid via withholding count as on time no matter when the withholding happens. Example: You have capital gains in January which result in $1000 of taxes due. In December you make a $1000 withdrawal from your IRA and have it 100% withheld for taxes. The government considers it on-time, with no penalty. (That IRA withdrawal would actually itself be taxable, so your total taxes would be somewhat more than $1000, but for simplicity this exampke ignores that).

Thanks. I guess capitals is considered income in this context? I have no employment or income per se. But treating the gains as income, perhaps I need to make a quarterly payment.

I don't really understand this: "How much to pay to avoid interest and penalties is 100% of last year's tax liability, 110% if last year's AGI was more than $150,000, or 90% of the current year's tax liability."

ETA: I noticed some Estimated Payment vouchers as part of my return this year. It sounds like I use that to submit these quarterly payments. If so, then maybe I just need to figure out how much to send.

Realized capital gains are income. If you sell something for more than you paid for it, the amount over what you paid for it is income in the year the item was sold. That's what "realized" means.

If you don't make any estimates and wait until April 15th to pay the tax you owe, then you will be charged interest and underpayment penalty. The part I quotes are the Safe Harbor provision to avoid paying interest and penalties.

If the total tax liability on your return from the prior year was $20,000 and you paid in at least $5,000 per quarter for this year by the dates listed, then you won't owe any interest or penalties. You could have $50,000 of tax liability and you'd be fine. You would have to pay the additional $30,000 by April 15th.

The 90% of the current year is also an option. Let's say your tax liability for the prior year was $200,000 because you sold stock to buy a house, but this year you won't be doing that and your total tax liability is only $10,000. As long as you paid in $2,250 per quarter by the dates, then you won't owe interest and penalties. Obviously, you wouldn't want to pay in 100% of the prior year, $200,000, if you were only going to owe $10,000.

quote:

ETA: I noticed some Estimated Payment vouchers as part of my return this year. It sounds like I use that to submit these quarterly payments. If so, then maybe I just need to figure out how much to send.

Yes. And please, please, please, put your SS#, the form number and year on the check: XXX-XX-XXXX Form 1040 2026, for example.

My dad used his bank's bill pay to make his estimates, neglected to do this, the IRS applied the payments to random years, and sent him a nasty letter saying he owed a bunch of interest and penatalties for not making the payments. That was fun getting that straightened out.

Long-term or short-term capital gain? Also depends on how much. From the IRS, topic #409:

To correctly arrive at your net capital gain or loss, capital gains and losses are classified as long-term or short-term. Generally, if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term. For exceptions to this rule, such as property acquired by gift, property acquired from a decedent, or patent property, refer to Publication 544, Sales and Other Dispositions of Assets; for commodity futures, see Publication 550, Investment Income and Expenses; or for applicable partnership interests, see Publication 541, Partnerships. To determine how long you held the asset, you generally count from the day after the day you acquired the asset up to and including the day you disposed of the asset.

If you have a net capital gain, a lower tax rate may apply to the gain than the tax rate that applies to your ordinary income. The term "net capital gain" means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss for the year. The term "net long-term capital gain" means long-term capital gains reduced by long-term capital losses including any unused long-term capital loss carried over from previous years. The term “net short-term capital loss” means the excess of short-term capital losses (including any unused short-term capital losses carried over from previous years) over short-term capital gains for the year.

Capital gains tax rates:
Net capital gains are taxed at different rates depending on overall taxable income, although some or all net capital gain may be taxed at 0%. For taxable years beginning in 2025, the tax rate on most net capital gain is no higher than 15% for most individuals.

A capital gains rate of 0% applies if your taxable income is less than or equal to:
$48,350 for single and married filing separately;
$96,700 for married filing jointly and qualifying surviving spouse; and
$64,750 for head of household.

A capital gains rate of 15% applies if your taxable income is:
more than $48,350 but less than or equal to $533,400 for single;
more than $48,350 but less than or equal to $300,000 for married filing separately;
more than $96,700 but less than or equal to $600,050 for married filing jointly and qualifying surviving spouse; and
more than $64,750 but less than or equal to $566,700 for head of household.

However, a capital gains rate of 20% applies to the extent that your taxable income exceeds the thresholds set for the 15% capital gain rate.

https://www.irs.gov/taxtopics/tc409

You can pay these directly to the IRS electronically. For the love, don't drop a check in the mail and actually expect it to get there. You also would have to save proof of date sent to avoid possible penalties when delayed in transit.

This all before you get to the situation of one of my firm's owners who had a $45K check stolen in transit to IRS, and his bank information shared and getting dinged for electronic check charges within a few days of mailing it.

Just don't drop below 90% of current year paid equally over 4 quarter and you're good. Or if you keep good records, you can pay as you realize the income. Just target 100% of projected current year actual and move on.

quote:

Originally posted by 229DAK:

Well done, but you missed NIIT.

Why not pay a few bucks for a CPA in your state / city to simply handle this for you? Why risk it on well-meaning but un-supportable guidance from a forum?

quote:

Originally posted by trapper189:

quote:

Originally posted by 229DAK:

Well done, but you missed NIIT.

And probably some other things, too. But he's more than likely under $250K.

quote:

Originally posted by 4MUL8R:
Why not pay a few bucks for a CPA in your state / city to simply handle this for you? Why risk it on well-meaning but un-supportable guidance from a forum?

This was my goal in the first place.

Without numbers, prior returns, and intimate knowledge of his finances, nobody is going to be able to explain how to figure it out beyond a cursory overview. I could figure it out if I had the information, but I'm retired and not getting paid anymore to take the risk of making a mistake.

Thanks all. Good info above. I think I know conceptually what to do. I'll try to estimate the amount due and how to submit (I'll look into direct pay from checking). I'll probably estimate just to be safe.

I've been wanting to procure the services of a CPA but a number of things give me pause.

Check into IRS Form 2210. If you don't understand that well enough to fill it in on your own, then my advice is, whatever's been giving you pause in getting a pro involved, it's worth kicking to the curb and getting a tax pro lined up.

The USPS is certainly not what it used to be!!

I always just make sure I withhold a total of 100% of my previous year's tax liability from any distribution in the current year, capital gains or otherwise. Never had a problem. A couple caveats...I keep income less than $150K and I typically take care of all distributions in January and specify withholding at the time of distribution. Most times income is equal to or slightly less than prior year. On the one occasion when it was higher, I had to write a check when filing but it wasn't much and there was no interest or penalties because I had covered the prior year's 100%.

quote:

Originally posted by joel9507:
Check into IRS Form 2210. If you don't understand that well enough to fill it in on your own, then my advice is, whatever's been giving you pause in getting a pro involved, it's worth kicking to the curb and getting a tax pro lined up.

Here are the instructions for Form 2210: https://www.irs.gov/pub/irs-pdf/i2210.pdf