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Guide

Brokerage tax in the US: what your 1099 settles, and what you still figure out

Schwab, Robinhood, Interactive Brokers — your broker sends a 1099-B and reports it to the IRS, so much of the work is done. But how a sale is taxed still turns on details the summary line does not spell out. Here is what matters.

Short-term and long-term are taxed differently

A capital gain on stock held one year or less is short-term, taxed at your ordinary income rate. Held more than a year, it is long-term, taxed at the lower long-term rate. The line between them is exact — more than a year, counted from the day after you bought — and which lots you are treated as selling changes which side of it a sale lands on.

Which shares you sold: lots and the default

Buy the same stock several times and sell part of it, and the gain depends on which lots went. The default is first-in-first-out — the oldest shares, usually the most likely to be long-term. A broker may let you specify lots instead, and the choice moves the tax. A 1099-B reports what was sold; reconstructing the lot detail across a year of trades is the part people rebuild by hand.

Wash sales disallow a loss

Sell at a loss and buy the same or a substantially identical security within 30 days either side, and the loss is disallowed for now — it is added to the basis of the replacement shares instead, and the holding period carries over. Nothing is lost forever, but the loss you thought you booked this year may not be there, and a plain sum of your sales will not show it.

What the 1099-B leaves you

The form totals your proceeds and, usually, your cost basis. What it does not do is characterize the whole picture for you across accounts: wash sales that span two brokers, lot choices, and reconciling a full year's trades into the short- and long-term buckets. That reconciliation is the work.

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