The short answer
No. When you sell shares you already own, brokers like E*Trade, Fidelity and Schwab don't withhold income tax on the sale. There's no setting you can turn on to change that. The whole sale price lands in your account, and the tax on your profit comes due later.
That catches a lot of people off guard, because RSUs work differently.
Why RSUs have withholding and stock sales don't
- RSUs are paid like wages. When they vest, the full value counts as pay. Your employer has to withhold tax on it, usually 22%, or 37% on the part above $1,000,000.
- Selling stock is an investment gain. Your profit (sale price minus what you paid, your basis) is a capital gain. The tax law doesn't require anyone to withhold on it.
So if you sell a large block of common stock, you can end up owing tens of thousands of dollars that nobody has set aside.
An example
Say you sell 7,250 shares at $75 that have a basis of $17. Your profit is $420,500. For a high earner, that could mean roughly:
- Federal long-term capital gains (20%): $84,100
- Net investment income tax (3.8%): $15,979
- North Carolina (3.99%): $16,778
- Total, with $0 withheld: $116,857
Three ways to pay it right away
1. Make an estimated payment the same day
This is the closest thing to withholding at the moment you sell.
- Federal: Use IRS Direct Pay or your IRS Online Account. Choose Estimated Tax and the correct tax year. It's free, and it's recorded on the day you pay.
- State: Most states have an online payment portal. In North Carolina, pay through NCDOR's e-services and choose an estimated payment (Form NC-40).
Paying soon after the sale stops the underpayment penalty from building.
2. Increase withholding from your paychecks
File a new W-4 with payroll and enter an extra flat amount to withhold from each check. Do the same on your state form (NC-4 in North Carolina).
This has a hidden advantage: the IRS treats paycheck withholding as if it were paid evenly all year. So extra withholding added in November can wipe out an underpayment penalty for earlier quarters. An estimated payment is only credited on the date you make it.
The drawback is that you need enough paychecks left in the year to cover the amount.
3. If your company runs the sale, ask about withholding
In some tender offers or company buybacks, the company processes the payout through payroll and may withhold tax. Ask the plan administrator before the sale closes. A regular sale through your broker never works this way. See How tender offers are taxed.
Estimated tax deadlines
- April 15: income from January through March
- June 15: April through May
- September 15: June through August
- January 15 of next year: September through December
If you miss a deadline, pay as soon as you can. The penalty works like interest, so it stops building once you pay.
How to avoid the penalty entirely
You won't owe an underpayment penalty if your withholding and estimated payments add up to at least:
- 90% of this year's tax, or
- 100% of last year's tax, rising to 110% if last year's income was over $150,000.
For many people with a one-time windfall, the prior-year rule is the easiest target to hit. More in Estimated taxes and safe harbor.
Run your own numbers
Enter your sale in the EquityTax Pro calculator to see exactly how much tax the sale adds, how much is already withheld, and what to pay each quarter. Add any estimated payments you've made in the Assumptions section to see your remaining shortfall.
This guide is general information, not tax advice. Talk to a CPA about your situation.
Frequently asked questions
Does Fidelity or E*Trade withhold taxes when I sell stock?
No. Brokers don't withhold income tax on stock sales in taxable accounts. You pay the tax through estimated payments or extra paycheck withholding.
Can I ask my broker to withhold tax on a sale?
Generally no. The only withholding on a regular sale is backup withholding, which applies when your taxpayer ID is missing. It isn't a planning tool.
What's the fastest way to pay tax after a stock sale?
Make a same-day estimated payment through IRS Direct Pay or your IRS Online Account, and through your state's payment portal.
Official sources (for the detail-minded)
- IRC Section 3402Withholding applies to wages, not to stock sale proceeds
- IRC Section 6654Penalty for not paying enough estimated tax during the year
- IRS Form 1040-ESHow to calculate and send estimated tax payments
- IRS Publication 505IRS guide to withholding and estimated tax
Run your own numbers
See your tax, take-home, and what to set aside. Free, and nothing is stored.
Keep reading
Too Little Tax Taken Out? How to Spot and Fix Underwithholding
Your employer withholds a flat 22% on most equity income, but your real rate can be far higher. Here's how to spot the gap and close it.
Penalties for Paying Tax Late: Underpayment, Late-Payment and Late-Filing
Three different penalties can apply when tax is paid late. Here's what each costs and how the safe harbors keep you clear.
How commissions and bonuses are taxed and withheld
A commission check isn't taxed at a special rate, but it's withheld differently from your salary. Here's why big checks can look over-taxed, and why you may still owe in April.
How ESPP shares are taxed
Your ESPP discount is taxed when you sell, not when you buy. How much counts as salary depends on how long you held the shares.
Estimates only. Not tax, legal, or investment advice. See our methodology