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My wife and I are trying to buy our first home and sold an index mutual fund with about 60k in capital gains.

This is my first time reading form 1040-ES, but it seems that it is made for an individual without withholding rather than an individual with withholding and one or more windfall gains.

Do we need to pay the entirety of the capital gains tax (about 9k) before June 15th? Or could I use losses later in the year to entirely offset this gain? If the market drops appreciably, then I could offset all/some of this gain. Is there software that can make this process easier?

I found this question on this topic, but it addresses more the existence of estimated taxes rather than the timing.

FWIW, neither of our income is large enough to handle this tax bill with a W-4 adjustment. We will both be unemployed in about one month and I'll be starting a new job in the fall, although our total income this year will be about the same relative to last year (ignoring the capital gains). We file jointly.

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Richard Herron
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1 Answers1

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No. You don't need to pay that by June 15th.

If you have stocks that are in a negative position, and sell before year end, you can negate the gain, partially or in full.

From a Forbes article by my friend, Jim Blankenship -

Understanding the Underpayment Penalty When you calculate the amount of tax that you owe, after you’ve subtracted however much you had withheld or paid in estimated tax throughout the year, if you haven’t paid in enough tax, the IRS will assess a penalty for underpayment. This penalty is based upon the lesser of two amounts:

  • 90% of the amount of tax you will pay in total for the year; or
  • 100% of the amount of tax you paid for the previous year.

In other words, a windfall does not always force you to pay a penalty.

JoeTaxpayer
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