How to Calculate Capital Gains Tax on US Stocks and Basic Tax-Saving Practices

TL;DR

• Capital gains tax on US stocks is calculated based on realized gains, and the calculation must consider cost basis, sale price, fees, currency gains or losses, and other costs.
• Tax rates and exemptions can change frequently, so confirm the latest rules with your brokerage or the tax authority.

1. Understand the overall flow

Taxation is based on whether gains are realized through a sale, not on holding period alone. First, organize buy and sell records by ticker, then calculate each trade's profit or loss and sum them. For foreign stocks, currency gains or losses from exchange rate changes are also taxable, so it is common to calculate in KRW.

2. Step-by-step calculation

1) Obtain trade records: prepare buy and sell details, trade dates, quantities, buy and sell prices, fees, and taxes beyond brokerage fees.
2) Determine cost basis: if you bought the same stock multiple times, decide on an accounting method such as FIFO. Using the annual profit and loss report from your broker is convenient.
3) Convert to KRW: apply the exchange rate for each trade date to compute profit or loss in KRW. Include currency conversion fees as costs.
4) Aggregate profit and loss: sum realized gains and losses to derive taxable capital gains. Check whether loss offset rules allow you to offset losses against other assets.
5) Filing and payment: report and pay overseas stock capital gains when filing your comprehensive income tax return, separate from year-end tax settlement. Filing procedures and deadlines may differ each year, so confirm the latest schedule.

3. Basic tax-saving practices

• Clarify profit and loss basis: keeping precise records of buy/sell prices, fees, and exchange rates can reduce unnecessary taxation.
• Strategic use of losses: realized losses can offset future gains, so consider timing and amounts of realized losses carefully. Note that artificially manipulating losses may be subject to regulation.
• Consider account structure: some investors consider account types or timing for tax reasons. Account-specific rules differ, so confirm with your broker or a tax professional.

4. Items to verify and where to get help

• Verify current tax rates, deductions, and filing deadlines with your broker, the tax authority, or a tax advisor.
• Use the annual profit and loss reports and trade statements provided by your broker to simplify calculations.

This article is for information purposes and is not investment advice.