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Can anyone tell me if taxes on proceeds from the sale of stock options are determined on the Schedule D?

In other words, can I sell one of my laggards to offset the gain from the sale of employee stock options?

I'm going to assume that what you're talking about with respect to the options is a same-day exercise/sale. If my assumption is wrong, ignore the rest of this post and please clarify.

The answer to your question is "not really, but...." Your profit in this transaction is taxed as wages. You do report the actual sale of the stock on Schedule D, but it basically turns out a small loss equal to the fees.

If your Schedule D shows a net loss you can apply up to $3,000 against your non-Schedule D income, so in that sense selling laggards will reduce your overall tax liability.

I'll repeat my oft-repeated advice regarding losers. Ignore taxes. If the stock still meets your criteria for holding it, keep it. If it doesn't, dump it now and put whatever you can get for it to work elsewhere. The taxes will take care of themselves.

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