What happens to my Tesla stocks?

The other day, Tobe, my eleven-year-old son who owns four Tesla stocks, asked me how much tax he would pay if he sold them today.

He bought the stocks two years ago at $229 per share.

Today, if he sells it at $370 per share, he would gain $141 per share.

If he sells all four shares, he has a gain of $141× four shares= $564.

Since he has held the stock for over a year, the gain is long-term capital gain subject to capital gain tax at 0%, 15%, or 20%, depending on his income.

Pay no taxes on his Tesla Stocks

Since Tobe doesn’t make any other money, he doesn’t need to pay any taxes if he sells his Tesla stocks today.

Hold the stocks for more than a year

For tax year 2024:

To simplify for a single, if your income is under $44K, you pay $0 in capital gain, and if your income is above $44K but less than $492K, your capital gain tax rate is 15%; for a single making $492K and above, it is 20%.

A capital gains rate of 0% applies if your taxable income is less than or equal to:

• $44,625 for single and married filing separately;

• $89,250 for married filing jointly and qualifying surviving spouse; and

• $59,750 for head of household.

A capital gains rate of 15% applies if your taxable income is:

• more than $44,625 but less than or equal to $492,300 for a single;

• more than $44,625 but less than or equal to $276,900 for married filing separately;

• more than $89,250 but less than or equal to $553,850 for married filing jointly and qualifying surviving spouse; and

• more than $59,750 but less than or equal to $523,050 for head of household.

Hold the stocks for less than a year

If you hold your stocks for less than a year and sell them, any gain will be taxed at the ordinary tax rate.

For example, assuming Tobe makes $20,000 in income for the year, has a gain on his stocks of $564, and holds the stock for less than a year, he is at a 12% tax rate, he will pay $67.68 in taxes ($564 × 12%).

Form 1099-B

Your stock brokerage will issue you a Form 1099-B around January or February to show the stocks you sold last year, how much the cost (the price you purchased the stocks), and how much the realized gain. Stock is only taxed when it is sold. Any unsold stocks that increase in value in the stock market are called unrealized gains; those are not taxable because you haven’t sold them.

You will report the stocks on your tax return, Schedule D, and the gain or loss will flow to your tax return, Form 1040.

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