Unlocking the Mystery of Capital Gains Taxes (Including the Wash Sale Rule)

June 06, 2025

Understanding capital gains and losses is important for managing investments and taxes. The IRS says almost everything you own and use for personal or investment reasons is a capital asset, like your home, stocks, and bonds. When you sell any of these, you either make a profit (a gain) or lose money (a loss). Profits and losses may increase or decrease the amount of tax you owe, depending on how long you’ve owned the asset.

Capital gains and losses can affect how much tax you pay in the year you sell your assets, but remember, if you sell personal things like your home or car, you can’t use those losses to lower your tax bill. For now, let’s focus on investments.

Short-term or long-term

There are two types of gains and losses: short-term and long-term. If you’ve owned something for one year or less, it’s considered short term. If you hold on to it for more than one year, it’s considered long term. This matters for tax purposes because short-term and long-term gains have different tax rates. Keep this in mind when selling investments in a taxable, non-qualified brokerage account.

How the sale of an investment is taxed

Here’s how to figure out how your investments will be taxed:

First, calculate gains and losses on assets you’ve held for one year or less (i.e., short-term assets). To determine a gain or loss, take the proceeds from the sale of each asset and subtract the amount you paid for it (i.e., its cost basis). The result is either a gain or a loss. Subtract short-term losses from short-term gains to find your net short-term gain or loss.

Next, calculate gains and losses on assets you’ve held for more than one year (i.e., long-term assets) using the same process. Subtract long-term losses from long-term gains to find your net long-term gain or loss.

If you have a net long-term gain and a net short-term loss: Subtract your short-term loss from your long-term gain to get your “net capital gain or loss.” Long-term gains are taxed at lower rates than your income. The rate can be 0%,15%, or 20% depending on your income. There may also be an extra 3.8% Medicare surtax. State tax rates can be different, so check with your local tax office.

If you have a net short-term gain and a net long-term loss: Subtract the long-term loss from the short-term gain. Any remaining gain will be taxed at your tax bracket based on your income level.

If you have both a net short-term gain and a net long-term gain: The short-term gain will be taxed at your regular income rate, while the long-term gain will have its own lower rates.

If you have a net loss, you can subtract up to $3,000 of losses from your other income on your tax return. If you have more losses, you can use them in future years.

The Wash Sale Rule

Lastly, there’s a rule called the wash sale rule. If you buy back the same investment (or one very similar) within 30 days before or after selling it, you cannot claim a loss on your tax return for that sale. You can, however, add the loss to the cost of the repurchased investment and benefit from the loss down the road when you sell that investment. Capital gains taxes can be tricky, but a tax professional can help you understand them better. To learn more, check out IRS Tax Topic 409, Capital gains and losses.

How are Restricted Stock Units (RSUs) Taxed?

June 06, 2025

Restricted Stock Units (RSUs) are a form of equity compensation. They are awarded as company stock and can be viewed as part of an employee’s overall compensation package. How this form of compensation is taxed can be tricky, so it is important to know the ins and outs so that there are no surprises come tax time.

RSU Basics

RSUs are typically awarded when an employee starts their job and/or on a regular basis at the discretion of the employer. When RSUs are awarded, the employee does not own them yet. Ownership comes according to a predetermined timetable known as a vesting schedule. For example, an award of 1,600 shares may vest 100 shares per quarter for the next 16 quarters (four years). As shares vest, employees can sell the shares as needed to generate cash. The selling of shares may be subject to restricted trading windows, so employees should check with their employer on that. Here is a breakdown of when and how employees are taxed on RSUs:

Taxation At the Time of Award

Unless your RSUs are immediately vested, they are generally not taxed at this time.

Taxation At the Time of Vesting

The vesting of your shares is a taxable event. The value of the shares that vest is taxed as ordinary income in the year that the vesting occurs, even if you don’t sell the shares. For example, if 100 shares vest on May 15th and the value per share is $50, $5,000 (100 shares x $50 per share) will be added as taxable income for the year.

The amount of federal taxes owed depends on your tax bracket which is determined by your overall tax situation for the year. Depending on your state of residence, state and local taxes may be owed as well. Note that the employer may automatically sell a certain amount of shares to be used for tax withholding at the federal and state levels, if applicable. Check with your employer to see if the number of shares sold for withholding can be changed to reflect your anticipated overall tax situation.

Taxation At the Time of Sale

The sale of vested RSUs is a taxable event as well. You will have to pay capital gains tax on any appreciation of the value of the stock from the time of vesting to the time of sale. Building on the example above, if the 100 shares are later sold for $60 per share (a total value of $6,000), you will owe capital gains tax on the $1,000 of appreciation (i.e., $6,000 sale value – $5,000 cost basis).

There are two types of capital gains:

Short-term capital gain. If the time between vesting and selling is one year or less, it will be a short-term capital gain and taxed as ordinary income for the year. 

Long-term capital gain. If the time between vesting and selling is more than one year, it will be considered a long-term capital gain and will be subject to long-term capital gains tax rates. 

Generally, less taxes are owed with a long-term capital gain, but you should always compare short- and long-term gains to identify which sales would reduce tax liability most effectively. If the value of the shares when sold is less than the value when they vested, this will incur a capital loss that may be used to offset capital gains in the same year (but be aware of the wash sale rule).

Pro Tip: If you don’t intend to hold on to them very long, consider selling shares that vest immediately to minimize taxes.

If you are fortunate enough to receive RSUs as a form of stock compensation, it’s important to understand how they are taxed as part of an overall tax planning strategy. As with many tax matters, it’s a good idea to consult with a tax professional to get advice on your specific tax situation.

The Basics of Unemployment Benefits

January 21, 2025

A fact of life in today’s world is that job loss can happen to practically anyone. Finding yourself unexpectedly unemployed is the chief reason financial planners recommend keeping an emergency fund of cash equal to between three and six months of essential living expenses. Fortunately, our individual cash resources are not the only resource we can fall back on if we find ourselves suddenly out of work due to a layoff or downsizing.

What are unemployment benefits?

Thanks to a joint program between the federal government and the states, unemployment insurance provides a limited amount of financial benefits payable to workers who find themselves out of a job through no fault of their own. These benefits are largely funded by payroll taxes levied on employers by the states. Voluntarily leaving a job, retiring, or accepting an early retirement package, however, would not qualify one to receive unemployment benefits.

How much can you receive?

Unemployment payments are not designed to replace all of the income lost due to a job displacement, but they can provide cash flow to help pay for some essential expenses, such as food, rent, etc. The amount of one’s benefit can vary substantially from state to state.

In general, you might receive an amount up to approximately half of your previous salary, although this amount may be further capped by the average earnings of workers in your state. Unemployment benefits are also subject to federal income tax. At the time you file your claim, you may request to have up to 10% of your benefit withheld for federal income tax purposes.

How long can you get benefits?

Workers in most states can generally receive unemployment benefits for up to 26 weeks. Massachusetts and Montana provide a few weeks more. Nine states currently provide fewer than 26 weeks of benefits, although this often changes with the economy: Arkansas, Michigan, South Carolina, Missouri, Idaho, Kansas, Alabama, Florida, and North Carolina. There are also periods when Congress has voted to extend the availability of unemployment benefits in particularly difficult economic times. You can find more on unemployment benefit periods at the Center on Budget and Policy Priorities.

How to apply for unemployment benefits

Immediately after becoming unemployed, contact your state’s unemployment office to file your unemployment claim. You can find web links and contact information for each state’s unemployment agency at the CareerOneStop website managed by the U.S. Department of Labor. Even if you know your termination date is coming, you cannot file for unemployment benefits until after you actually work your last day.

If you worked in a state other than the state where you reside, or if you worked in more than one state, contact the state unemployment office where you live for guidance.

VIDEO: Your COVID-19 Financial Survival Kit

March 25, 2020

FAQs from Your COVID-19 Financial Survival Kit Webcast

March 25, 2020

You may have joined our recent webcast titled Your Covid-19 Financial Survival Kit. We had a lot of questions come through during the sessions so we want to share the commonly asked ones, with their answers! Our facilitator, Bruce Young, CFP, has provided written answers below.

Take a look at the different topic areas, and for more resources see the banner on the home page of your Financial Finesse Hub

401 (k)

Q) Should I keep funding my 401 (k)?

A) Yes! you are buying low and you don’t want to miss out on matching funds if it’s available to you.

Q) Should we lower the amount we are contributing to our 401 (k) for the current time period?

A) Unless you need to redirect funds to beef up your emergency fund, you should avoid lowering your 401 (k) contribution because you are now buying low and can take advantage of dollar-cost averaging.

Q) Is this a good time to increase my 401 (k) payroll deduction?

A) Yes, if you have an emergency fund already then this is a great opportunity to be investing more in your 401 (k) while the market is low.

Q) I am within 11 months of retirement – should more go to fixed income (money market, CD’s) or leave a portion to stocks, etc.?

A) Ideally, you will want to have up to 3 years’ worth of living expenses in a “safe” investment such as money market CD’s, etc. Typically, a conservative portfolio based on your comfort level of risk. An example might be 20 to 35% stocks, 65 to 80% fixed income.

Q) I am retiring in less than a year, should I continue to put money in my 401 (k)?

A) Yes, especially if you have a company match in your 401 (k).

Q) What if you have a 457? Should I borrow from a 457 before my 401 (k)?

A) While a retirement loan is generally a last resort, the benefit of taking a loan from your 457 is IF you had to leave / separate from service you may not be subject to the 10% penalty (if under age 59 ½)

Q) I have two years until retirement – what is my risk tolerance.

A) Typically, a conservative portfolio based on your comfort level of risk. An example might be 20 to 35% stocks, 65 to 80% fixed income.

Q) If I have a 401 (k) loan should I convert it to a distribution payout? I’m 65.

A) Ideally, no as you will be making it a taxable event.

Market

Q) Is there any benefit to withdrawing large sums of money out of bank accounts during these times ie how do you calm a panicked senior?

A) No. That being said, having a set amount of cash on hand ($ 200 – $ 1,000) for emergency cash transactions is a good practice.

Q) How do you communicate to friends and family members that they shouldn’t be liquidating at this point?

A) First off, it’s maintaining a calmness when talking with them. Going over what their time frame is (when they need the money), recognizing that the investment markets do go down and historically they have rebounded, and finally re-assess their risk tolerance, ie do they need to re-balance their portfolio.

Q) When is the market going to go back up?

A) I wish I knew! Seriously, no one knows that answer, hence sticking to the sound fundamentals of investing and (ideally) dollar-cost averaging into the market.

Q) Once the market stops going down, do you recommend investing in the stock market?

A) Since we do not know when that inflection point will occur, you want to maintain your investment strategy through both the ups and downs of the market.

Q) Is now a good time to purchase stocks?

A) Yes, if you have a long-term investment timeline this could be an excellent time to purchase stocks!

College

Q) Should I keep saving for my child’s education? Or keep it for emergencies?

A) Saving for a child’s education should be behind (1) saving for an emergency (2) saving for your retirement. Also, if there is any high-interest rate debt, that should be prioritized over children’s education.

Q) I have a high school senior going off to college in the fall. I’m concerned about the loss we have recently taken on the money we have set aside for college. Will the market rise soon enough, or should we sell and take a loss?

A) We do not know when the market will rebound. Prior to selling at a loss, consider alternative means, ie student loans that could be paid off once the market does return.

Emergency Fund

Q) What is the correct amount of money for an emergency fund?

A) Start with a goal of $ 1,000 working towards 3 – 6 months’ worth of NECESSARY expenses

Qis it a good idea to hide away money in our home if the market does not recover? Is this what you mean about emergency money?

A) Having emergency cash (think a range of $ 200 – $ 1,000) at home is advisable. Your emergency SAVINGS should be in a safe type of investment (think savings account, CDs, money market accounts).

Buying a Home

Q) I just bought a house this month at what seems to have been the peak of the housing market. Should I be concerned? Or is this a long-term, ride-it-out scenario?

A) Unless you bought the house with the expectation of “flipping” it, a home purchase is a long-term investment

Q) I’m saving up a down payment for a house, now that the stock market is plummeting, I want to invest some money in the market while prices are low, how should I prioritize this?

A) It depends on which goal is MOST important to you. If buying a home is, then saving in a savings/money market account is the preferred way to save. If buying a home is a “nice to do, but can wait” then investing in the market can be beneficial when prices are low.

Q) Hi, we have been preparing to buy a house in an area, that is always high demand and expensive and it will stay that way during the crisis too. Should we buy or wait if something good comes up?

A) With mortgage rates at historical lows, it may still be a great time to buy a home, but you’ll want to consider your job stability.

Q) I am currently in a transition, should I purchase a home or continue to lease/rent?

A) Mortgage rates are at historical lows, so you should consider job stability and how long you plan to stay in the area before making the decision.

Q) If possible, would this be a good time to refinance a mortgage?

A) Yes! Mortgage rates are at historical lows.

Student Loan

Q) How should you think about federal student loans now that interest rates are waived?

A) If you can continue to make your normal payment, this is a wonderful opportunity to pay down the balance more quickly. If you are having issues making the payment, contact your student loan servicer for a forbearance program.

Are You Leaving Money On The Table?

November 13, 2015

One of the things that I have heard people say in conversations regarding money is “every dollar counts” and…I agree with that. To that end, there is some money that a lot of employees leave on the table on a fairly regular basis. With just a few slight tweaks, they could recover some out-of-pocket expenses that far too often are being put on a credit card and creating a gradual increase in debt level. The best part is that these are all 100% above board and employer-sanctioned. We all work hard, and in the course of doing that work, you should be able to recover some of the expenses of working. Continue reading “Are You Leaving Money On The Table?”

The Best Place To Find Financial Products And Services

November 10, 2015

My cousin is the ultimate bargain hunter. If you are looking for that amazing combination of value and quality, she is your woman. She can find the $5,000 vacation for $1,000 or the $500 coat for $69.99. She came to me excited because she found an amazing deal on life insurance. She has been searching for months with no luck and finally went to a financial advisor who gave her the cheapest quote she had gotten so far. Continue reading “The Best Place To Find Financial Products And Services”

5 Things To Know About Group Insurance Discount Programs

November 04, 2015

You may not view it as an employee benefit, but discount insurance programs could be a valuable part of your overall benefits package. Employers and other large groups are often able to negotiate much lower rates simply because the risk is spread out over a larger pool than if you just purchased the policy as an individual. Examples of discounted insurance policies you may be able to realize through work include homeowners or renters, auto, umbrella and even pet insurance. Here a few things to consider about these perks: Continue reading “5 Things To Know About Group Insurance Discount Programs”

Making the Most of Your Employee Discount Programs

October 28, 2015

A popular component of many employers’ wellness programs is a discount on membership to local fitness centers and/or weight loss programs, which can be a great way to save some money toward your financial goals. If you’re currently paying a gym membership or using a program such as Weight Watchers, definitely check to see if you can get a discount through work. It’s a no-brainer. Our health insurance benefit at Financial Finesse actually offers a $20 per month rebate on participating gyms but in order to receive it, participants need to attend the gym at least twelve times per month. For many people, that’s the motivation they need to show up! Continue reading “Making the Most of Your Employee Discount Programs”

Are You Ready For Open Enrollment?

October 27, 2015

It’s open enrollment time…that time of the year when you get this huge booklet or email of benefits and have to wade through all of the papers and links to figure out what to do while planning for the holidays at the same time. Remember to take time to really think about how you used your benefits last year so you can make the best decision. Here are a few things to consider: Continue reading “Are You Ready For Open Enrollment?”

5 Questions to Ask About Your Employer Tuition Benefit

October 21, 2015

Despite the inflation of college tuition far outpacing the growth of wages, having a bachelor’s degree is still one of the best ways to boost earning power and job opportunities. A 2014 report found that a person with a bachelor’s degree earns over $20,000 more per year on average than someone with just a high school diploma. One way to help defray the cost of college is to take advantage of your employer’s tuition reimbursement program, but before you do, here are some questions to answer: Continue reading “5 Questions to Ask About Your Employer Tuition Benefit”

Don’t Leave Any Money On The Way Out

October 06, 2015

I was recently talking to a dear friend of mine who just lost her job due to a layoff. She was shell-shocked, scared and not sure what to do. As I listened to her talk about her plan, I asked her about her workplace benefits and she said that she got the package, saw no value in anything she had and was getting ready to throw the package away. Continue reading “Don’t Leave Any Money On The Way Out”

Take Advantage Of Your EAP

September 29, 2015

As I talk to people about their finances, I find that many need guidance for the everyday issues like daycare, eldercare, and legal or financial issues to get them on the right track. My guidance is always to research your company benefits to take full advantage of everything your company has to offer to help you financially. I find that one of the most underutilized benefits is the employee assistance program. Continue reading “Take Advantage Of Your EAP”

The Hidden Costs Of Overlooked Benefits

July 29, 2015

August is an overlooked month. Every other month of the year has a holiday or is associated with an exciting beginning, but not August. Many of us try to sneak in one last summer weekend or some back to school shopping but other than that, August is usually a lull in the calendar. A great way to make August productive is to examine the employee benefits programs that you aren’t taking advantage of so that you know which options you do want to sign up for during open enrollment this fall. A few minutes now can help you be prepared to maximize your benefits and possibly save thousands of dollars instead of rushing through a decision or just doing what you did last year. Continue reading “The Hidden Costs Of Overlooked Benefits”

5 Retirement Plan Benefits You’re Probably Overlooking

July 02, 2015

One thing that I’ve noticed when speaking to HR executives and other employees about their benefits is that many valuable retirement plan benefits aren’t being taken advantage of. These benefits are part of your compensation so not utilizing them is like not taking your whole paycheck. Here are 5 in particular: Continue reading “5 Retirement Plan Benefits You’re Probably Overlooking”

The Value of Your EAP Program

June 09, 2015

Years ago when I was pregnant, I was a nervous wreck. I did what every pregnant woman should not do. I found every article I could on every worse-case scenario imaginable about daycare. Continue reading “The Value of Your EAP Program”

Don’t Leave Any Money On The Table

June 02, 2015

A few days ago, I was meeting with a friend that just changed jobs. She was excited about the pay, her new co-workers and the shorter commute to work. As she started talking, I mentioned that she should take advantage of all the benefits her company offers and not leave any extra money on the table. Continue reading “Don’t Leave Any Money On The Table”

My $280 Mistake

February 05, 2015

I admit it. I goofed. Despite being a financial planner who often helps people with their benefits, I made a mistake with my own. As I was looking at my expenses and taxes for last year, I realized that I could have reduced my taxes by $230. That’s the amount I would have saved if I contributed the $817 I spent on eligible vision and dental expenses last year to my company’s limited-purpose FSA (flexible spending account). Continue reading “My $280 Mistake”