Do you pay taxes on stock gains that are just returning to their original purchase price?
You don't generally pay capital gains taxes until you sell the stock. If you bought it in 2013 and the price goes up in 2014 but you just hold on to the stock, you won't have to pay any taxes on it. If you then sold it in 2015 for a profit, you'd have to pay capital gains taxes on the profit. Note that this excludes dividends. Dividends may complicate the matter somewhat. I'm also assuming you are in the U.S. or Canada, or a country like one of those two. It's possible some other country does taxes differently, though it'd surprise me. The tax is only payable on the gain you make  i.e the difference between the price you paid and the price you sold at. In your cse no tax is payable if you sell at the same price you bought at
Yes. You incur income tax on the RSU on they date they vest. At this point you own the actual shares and you can decide to sell them or to hold them. If you hold them for the required period, and sell them later, the difference between your price at vesting and the sales price would be taxed as long term capital gains. Caution: if you decide to hold, you are still liable to pay income tax in the year they vest. You have to pay taxes on income that you haven't made yet. This is fairly dangerous: if the stock goes down, you may lose a lot of this tax payment. Technically you could recover some of this through claiming capital losses, but that this is severely restricted: the IRS makes it much easier to increase taxes through gains than reducing taxes through losses. The sale of shares on vesting convolutes matters. In a way similar to how reinvested dividends are taxed but the newly purchased fund shares' basis has to be increased, you need to be sure to have the correct per share cost basis. It's easy to confuse the total RSU purchase with the correct numbers, only what remained.  The vesting stock is a taxable event, ordinary income.  You then own the stock at that cost basis. A sale after that is long or short term and the profit is the to extent it exceeds that basis.  The fact that you got these shares in 2013 means you should have paid the tax then. And this is part two of the process. Of course the partial sale means a bit of math to calculate the basis of what remained. ESPP tax treatment is complicated.  If you received a discount on the purchase of your stock, that discount is taxable as ordinary income when you sell the stock.  Any profit about the market value when the stock was purchased is taxed based upon the holding period of the stock. If you have held the stock less than a year, the profit is taxed at your marginal tax rate (ie taxed as ordinary income). If the stock is held for more than a year, it is taxed at a special capital gains tax rate, which ranges from 0-20% depending on your marginal tax rate (most people pay 15%). Elaborating on kelsham's answer: You buy 100 shares XYZ at $1, for a total cost of $100 plus commissions. You sell 100 shares XYZ at $2, for a total income of $200 minus commissions. Exclusive of commissions, your capital gain is $100 for this trade, and you will pay taxes on that.  Even if you proceed to buy 200 shares XYZ at $1, reinvesting all your income from the sale, you still owe taxes on that $100 gain.  The IRS has met this trick before. "I've bought ISO stock over they years -- in NYSE traded companies.  Every time I've done so, they've done what's called ""sell-to-cover"".  And the gubmint treats the difference between FMV and purchase price as if it's part of your salary.  And for me, they've sold some stock extra to pay estimated taxes. So, if I got this right...  20,000 shares at $3 costs you 60,000 to buy them.  In my sell-to-cover at 5 scenario: did I get that right?  Keeping only 4,000 shares out of 20,000 doesn't feel right.  Maybe because I've always sold at a much ratio between strike price and FMV. Note I made some assumptions:  first is that the company will sell some of the stock to pay the taxes for you.  Second is your marginal tax rate.  Before you do anything check these. Is there some reason to exercise immediately?  I'd wait, personally." Not necessarily, just because a tax rate is low and the potential monetary gain in the short-term is high, that doesn't mean that stock buybacks are in the best interest of shareholders, the general populace, or the American economy. The speaker implied that these actions were nefarious, just because the pie is on the window sill it doesn't mean you should take it. "You are missing the fact that the company can buy back its own shares. For simplicity, imagine the case that you own ALL of the shares of XYZ corporation.  XYZ is very profitable, and it makes $1M per year.  There are two ways to return $1M to you, the shareholder: 1)  The company could buy back some fraction of your shares for $1M, or  2)  The company could pay you a $1M dividend. After (1) you'd own ALL of the shares and have $1M. After (2) you'd own ALL of the shares and have $1M. After (1) the total number of shares would be fewer, but saying you owned less of XYZ would be like complaining that you are shorter when your height is measured in inches than in centimeters. So indeed, a buyback is an alternative to a dividend. Furthermore, buybacks have a number of tax advantages over dividends to taxable shareholders (see my answer in Can I get a dividend ""free lunch"" by buying a stock just before the ex-dividend date and selling it immediately after?).  That said, it is important to recognize the shareholders who are less savvy about knowing when to accept the buyback (by correctly valuing the company) can get burned at the profit of the savvy shareholders.  A strategy to avoid being burned if you aren't price savvy is simply to sell a fraction in order to get your pro rata share of the buyback, in many respects simulating a dividend but still reaping some (but not all) of the tax advantages of a buyback." (I'm assuming the tag of United-states is accurate) Yes, the remaining amount is tax free -- at the current price.  If you sell at exactly the original price, there is no capital gain, no capital loss.  So you've already payed the taxes. If you sell and there is a capital gain of $3000, then you will pay taxes on the $3000.  If 33% is your marginal tax rate, and if you held the stock for less than a year, then you will keep $7000 and pay taxes of $1000.  Somehow, I doubt your marginal tax rate is 33%. If you hold the stock for a year after eTrade sold some for you to pay taxes, then you will pay 15% on the gain -- or $450. eTrade sold the shares to pay the taxes generated by the income.  Yes, those shares were considered income.  If you sell and have a loss, well, life sucks.  However, if you sell something else, you can use the loss to offset the other gain.  So if you sell stock A for a loss of $3000, and sell stock B at a gain of $4000, then you pay taxes on the net of $1000. No Tax would have been deducted at the time of purchase/sale of shares. You would yourself be required to compute your tax liability and then pay taxes to the govt. In case the shares sold were held for less than 1 year - 15% tax on capital gains would be levied. In case the shares sold were held for more than 1 year - No Tax would be levied and the income earned would be tax free. PS: No Tax is levied at the time of purchase of shares and Tax is only applicable at the time of sale of shares. "The price at which a stock was purchased is a sunk cost--that is, you cannot go back in time and reverse the decision you made to purchase that stock.  Another example of a sunk cost would be purchasing a non-refundable, non-transferable movie ticket.  Sunk costs have the tendency to create a cognitive bias in which we feel that the amount we paid at some point in the past should have some sort of bearing on the decision we make now--the purchaser of the ticket feels he must go see the movie even if he no longer wishes too, lest the ticket ""go to waste""... the investor hopelessly clings to a battered stock for that tiny chance that just maybe some day it will return to its former glory.  This is referred to as the ""sunk cost fallacy"" and is considered to be irrational behavior by economists. Keeping this in mind, your hopes and dreams for the stock at the time you purchased it should have no bearing on the decision you make now.  Similarly, whether the stock has risen or fallen in price since your purchase date should have no bearing.  Instead, you must consider what you expect the stock to do from this very moment on into the future--that is, you must act at the margin. You've indicated that you are faced with two choices--sell the stock now, incur the loss, but benefit from the tax break (Option A).  This benefit is quite easily quantifiable--it is your marginal tax rate multiplied by the additive inverse of the loss (assuming you have/will have other gains to offset).  Let's just assume that you incurred a $1000 loss, at a marginal tax rate of 20%, which means your tax benefit for the loss is $200. The second choice--to hold the stock in hopes of it rising in price (Option B)--is a bit harder to quantify.  You must assume that today is day zero, and that every cent in price the stock rises is a gain to you, and every cent in price the stock looses is a loss to you.  If you believe that the stock will rise to a price that will net your more than your tax benefit from option A, then holding the stock is more favorable than selling it at a loss today.  Conversely, if you believe this stock will fall even further in the future, or not rise enough to net you $200 (per the example), then Option A is preferable. Granted, there are some additional complications that play into your decision.  By selling the stock today, you not only get a tax benefit from the loss, but you've also freed up the funds previously used to purchase that stock to be invested elsewhere (in hopefully a better performing asset).  If you choose to stick with your current stock, then the gains you may have netted elsewhere must be considered as an opportunity cost associated with Option B.  Finally, the tax benefit is essentially guaranteed (so in our example, a $200 risk free return), while sticking with the stock in Option B still comes with some risk." You wouldn't fill out a 1099, your employer would or possibly whoever manages the stock account.   The 1099-B imported from E-Trade says I had a transaction with sell price ~$4,500.   Yes.  You sold ~$4500 of stock to pay income taxes.  Both the cost basis and the sale price would probably be ~$4500, so no capital gain.  This is because you received and sold the stock at the same time.  If they waited a little, you could have had a small gain or loss.   The remainder of the stock has a cost basis of ~$5500.   There are at least two transactions here.   In the future you may sell the remaining stock.  It has a cost basis of ~$5500.  Sale price of course unknown until then.  You may break that into different pieces.  So you might sell $500 of cost basis for $1000 with a ~$500 capital gain.  Then later sell the remainder for $15,000 for a capital gain of ~$10,000. For ESPP, the discount that you get is taxed as ordinary income. Capital gains is taxed at the appropriate rate, which is different based on how long you hold it. So, yes, if the stock is going up, does it still count as a capital gain or loss? Yes. Is it essentially treated like you sold the stock at the price of the buy-out?  Yes. Do you still get a 1099-B from your broker? Yes. "Assuming your investments aren't in any kind of tax-advantaged account (like an IRA), they are generally not tracked and you indeed may pay more taxes.  What will likely change, however, is your cost basis.  You only pay tax on the difference between the value of the investment when you sell it and its value when you bought it. There is no rule that says once you sell an investment and pay taxes on the gain, you will never again pay any taxes on any other investments you then buy with that money.  If you own some investment, and it increases in value, and then you sell it, you had a capital gain and owe taxes (depending on your tax bracket, etc.).  If you use the money to buy some other investment, and that increases in value, and then you sell it, you had another separate capital gain and again owe taxes. However, every time you sell, you only are subject to capital gains taxes on the gain, not the entire sale price.  The value of the investment at the time you bought it is the cost basis.  When you sell, you take the sale price and subtract the cost basis to find your gain, So suppose you bought $1000 worth of some ETF many years ago.  It went up to $2000 and you sold it.  You have $2000 in cash, but $1000 of that is your original money back, so your capital gain is $1000 and that is the amount on which you owe (or may owe) taxes.  Suppose you pay 15% tax on this, as you suggest; that is $150, leaving you with $1850.  Now suppose you buy another ETF with that.  Your cost basis is now $1850.  Suppose the investment now increases in value again to $2000.  This time when you sell, you still have $2000 in cash, but this is now only $150 more than you paid, so you only owe capital gains taxes on that $150.  (A 15% tax on that would be $22.50.) In that example you had one capital gain of $1000 and a second of $150 and paid a total of $172.50 in taxes (150 + 22.50).  Suppose instead that you had held the original investment and it had increased in value to $2150 and you had then sold it.  You would have a single capital gain of $1150 (2150 minus the original 1000 you paid).  15% of this would be the same $172.50 you paid under the other arrangement.  So in essence you pay the same taxes either way.  (This example is simplified, of course; in reality, the rate you pay depends on your overall income, so you could pay more if you sell a lot in a single year, since it could push you into a higher tax bracket.) So none of the money is ""tax exempt"", but each time you sell, you ""reset the counter"" by paying tax on your gain, and each time you buy, you start a new counter on the basis of whatever you pay for the investment.  Assuming you're dealing with ordinary investment instruments like stocks and ETFs, this basis information is typically tracked by the bank or brokerage where you buy and sell them.  Technically speaking it is your responsibility to track and report this when you sell an investment, and if you do complicated things like transfer securities from one brokerage to another you may have to do that yourself.  In general, however, your bank/brokerage will keep track of cost basis information for you." "This answer is about the USA. Each time you sell a security (a stock or a bond) or some other asset, you are expected to pay tax on the net gain. It doesn't matter whether you use a broker or mutual fund to make the sale. You still owe the tax. Net capital gain is defined this way: Gross sale prices less (broker fees for selling + cost of buying the asset) The cost of buying the asset is called the ""basis price.""  You, or your broker, needs to keep track of the basis price for each share. This is easy when you're just getting started investing. It stays easy if you're careful about your record keeping.  You owe the capital gains tax whenever you sell an asset, whether or not you reinvest the proceeds in something else. If your capital gains are modest, you can pay all the taxes at the end of the year. If they are larger -- for example if they exceed your wage earnings -- you should pay quarterly estimated tax. The tax authorities ding you for a penalty if you wait to pay five- or six-figure tax bills without paying quarterly estimates.  You pay NET capital gains tax. If one asset loses money and another makes money, you pay on your gains minus your losses. If you have more losses than gains in a particular year, you can carry forward up to $3,000 (I think). You can't carry forward tens of thousands in capital losses.  Long term and short term gains are treated separately. IRS Schedule B has places to plug in all those numbers, and the tax programs (Turbo etc) do too. Dividend payments are also taxable when they are paid. Those aren't capital gains. They go on Schedule D along with interest payments. The same is true for a mutual fund. If the fund has Ford shares in it, and Ford pays $0.70 per share in March, that's a dividend payment. If the fund managers decide to sell Ford and buy Tesla in June,  the selling of Ford shares will be a cap-gains taxable event for you.  The good news: the mutual fund managers send you a statement sometime in February or March of each year telling what you should put on your tax forms.  This is great. They add it all up for you. They give you a nice consolidated tax statement covering everything: dividends, their buying and selling activity on your behalf, and any selling they did when you withdrew money from the fund for any purpose.   Some investment accounts like 401(k) accounts are tax free. You don't pay any tax on those accounts -- capital gains, dividends, interest -- until you withdraw the money to live on after you retire. Then that money is taxed as if it were wage income. If you want an easy and fairly reliable way to invest, and don't want to do a lot of tax-form scrambling, choose a couple of different mutual funds, put money into them, and leave it there. They'll send you consolidated tax statements once a year. Download them into your tax program and you're done. You mentioned ""riding out bad times in cash.""  No, no, NOT a good idea. That investment strategy almost guarantees you will sell when the market is going down and buy when it's going up. That's ""sell low, buy high."" It's a loser. Not even Warren Buffett can call the top of the market and the bottom.  Ned Johnson (Fidelity's founder) DEFINITELY can't."