selling stocks taxes
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Stock Trading: Professional Stock Trader Library (Interactive Cd-roms) 2010 $400.00 A RECENT CUSTOMER wrote us to say: “I just viewed the entire Professional Trader Library CD collection I received last Friday. I can’t begin to say how educational and inspiring the series has been for me, and what a fine job OTA has done in providing quality education for the self-directed trader. If the CD’s are indicative of the quality of education I can expect from the live training. I’m enco… |
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Bond Investing For Dummies $12.44 Bonds and bond funds are among the safest and most reliable investments you can make to ensure an ample and dependable retirement income â if you do it right! Bond Investing For Dummies helps you do just that, with clear explanations of everything you need to know to build a diversified bond portfolio that will be there when you need it no matter what happens in the stock market.This plain-En… |
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Sell on Amazon: A Guide to Amazon’s Marketplace, Seller Central, and Fulfillment by Amazon Programs $12.16 If you are in business to sell consumer goods — or you want to be — you should be on Amazon.com.More than 90 million customers shop at Amazon. As its global business booms, Amazon is inviting all sorts of independent sellers — large and small businesses, individuals, and mom-and-pop shops — to sell their merchandise right on Amazon.Whether you’re just starting or already in business, you can b… |
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Stock Options For Dummies $12.00 If youâre like the majority of the estimated 12 million employees in the U.S. who have stock options as a key component to their compensation packages, you have a vague notion, at best, of how options work and what they can mean to your financial well being. Whatâs the vesting schedule for your shares and how will their strike price be set? What type of stock option grant will you receiv… |
Calculate the investment basis correctly or end-up paying double tax!
When you purchase a stock, the broker gives you an advice mentioning the cost. Then it is a straight transaction and there is no problem while calculating the basis when you make the sale. You take the purchase price as the basis and calculate capital gain or capital loss.
However, things are tricky when you reinvest in stocks. In this case the calculation of profit or loss on sale of stock reinvested is slightly complicated.
Suppose you purchased 500 shares of a stock for $2,500 in 2006. You received a dividend of $200 in the same year and that dividend was reinvested. You received another dividend of $300 in the year 2007 and that was reinvested. In the year 2008, you sold all your stock for $3,300. Here, the basis of your investment is $3,000 (and NOT $ 2,500) and you should pay taxes on the capital gain of $300. You have already paid taxes on dividends received in 2006 and 2007 and these amounts should be added to the basis while calculating your capital gain.
IRS considers reinvested earnings as paid to you, though you never had this cash in your hand. These earnings are supposed to be ‘constructively received’ by you meaning you could have taken the cash if you opted for it. These earnings have already been reported on Form 1099–DIV and you must have paid taxes on them in the year of their receipt.
If you are not careful, you may not account for the reinvested distributions and end-up donating Uncle Sam as tax for the second time on the same money!
The same principle applies for calculating your losses. If you have made a loss, it can be used to reduce other gains. However a wrong calculation of the basis would prevent you from taking the full benefit.
To continue with the same example, if you sold that stock for $2000, you are making a loss of $1000 (not $500 which will be apparent from the normal calculations). This extra loss can make a substantial difference in your final tax payment.
You need not overpay IRS on your investment gains or losses. So you need to preserve all your account statements in order to make correct calculations. The statements will also show you the payment of any fees or charges to acquire or sell stock. These amounts are not deductible from your income, but they are useful to calculate the basis.
To maintain this paperwork you need a little extra effort. But it can definitely put extra money in your pockets.
About the Author
Chintamani Abhyankar, is a well known expert in the field of finance and taxation for last 25 years. He has written many books explaining inside secrets of the magic world of personal finance. His famous eBook Stop donating your money to IRS which is now running in its second edition, provides intricate knowledge and valuable tips on personal finance and income tax.
selling stocks taxes Questions
When selling stocks,is tax paid on dollar amount of stock at time of sale,or just the profit made on the stock?
I’ve bought some stocks recently and I don’t know a whole lot about capital gains taxes. The stocks values have increased and I want to get an idea of my target value to sell them at. Correct me if I’m wrong, but I believe the rule is if you sell a stock less than a year after you buy it, you have to pay a 20%(?) capital gains tax. Is this correct, and if so – is the tax paid on the profit you made or the value of the entire stock? Ex. I buy a stock for $1 a share. The stock is now worth $2 and I sell it. Should I assume the tax is $.20 a share, or $.40?
Cap gains is based on the gain in the stock. So if you buy at 1 and sell at 2 you only pay taxes on the dollar that you gained. However, if you hold the stock for one year or less (365 days or less) you would pay your ordinary income tax on it (not a flat 20% ) up to 35%. If you hold it more than a year, you would pay taxes based on your income bracket.
5% for taxpayers in the 10% and 15% tax brackets
(zero percent starting in 2008)
15% for taxpayers in the 25%, 28%, 33%, and 35% tax brackets
if you are lower than the 10% bracket there is no tax.
Do I pay taxes on stocks I buy/sell through a rollover IRA?
If I open a rollover IRA (with 401K money), can I buy/sell/trade stocks tax-free, so long as I don’t actually withdraw cash from the IRA account itself?
“If I open a rollover IRA (with 401K money), can I buy/sell/trade stocks tax-free, so long as I don’t actually withdraw cash from the IRA account itself?”
Yes.
That is the advantage of these accounts. You can make as many trades as you wish and if they are profitable, you will not pay taxes on that profit on an ANNUAL basis. The money is just taxed as ordinary income when you take distributions from the account AFTER you are 59 1/2 years old.
The downside is that if you have losses, you can not write them off like you can if it was a taxable account.
selling stocks taxes Videos
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Apple iMac MC510LL/A 27-Inch Desktop (OLD VERSION) $1,699.00 The new iMac is the ultimate all-in-one computer. Its Intel Core i3 processor features an advanced architecture and set new benchmarks for iMac performance. And fast discrete graphics processors now come standard in every iMac. The 27-inch widescreen display is perfect for HD video, and the Apple Wireless Keyboard and Magic Mouse keep your desktop tidy. The 27-inch iMac features a brilliant LE… |
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Ivy Skins Duo Arm Case for iPhone 3G (Green/Black) $29.99 The iPhone XyloDuo case is a perfect accessory for your iPhone 3G and everything you will do with it. Its sophisticated design accentuates the style of the modern individual. The XyloDuo provides the protection you need with the style that you require. Featuring bumper-to-bumper protection for iPhone 3G and amazing high-grade polysilicon material, Xylo Duo’s all-silicon design integrates a discret… |
|
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Bond Investing For Dummies $12.44 Bonds and bond funds are among the safest and most reliable investments you can make to ensure an ample and dependable retirement income â if you do it right! Bond Investing For Dummies helps you do just that, with clear explanations of everything you need to know to build a diversified bond portfolio that will be there when you need it no matter what happens in the stock market.This plain-En… |
|
|
Sell on Amazon: A Guide to Amazon’s Marketplace, Seller Central, and Fulfillment by Amazon Programs $12.16 If you are in business to sell consumer goods — or you want to be — you should be on Amazon.com.More than 90 million customers shop at Amazon. As its global business booms, Amazon is inviting all sorts of independent sellers — large and small businesses, individuals, and mom-and-pop shops — to sell their merchandise right on Amazon.Whether you’re just starting or already in business, you can b… |
|
|
Stock Options For Dummies $12.00 If youâre like the majority of the estimated 12 million employees in the U.S. who have stock options as a key component to their compensation packages, you have a vague notion, at best, of how options work and what they can mean to your financial well being. Whatâs the vesting schedule for your shares and how will their strike price be set? What type of stock option grant will you receiv… |
|
|
Stock Trading: Professional Stock Trader Library (Interactive Cd-roms) 2010 $400.00 A RECENT CUSTOMER wrote us to say: “I just viewed the entire Professional Trader Library CD collection I received last Friday. I can’t begin to say how educational and inspiring the series has been for me, and what a fine job OTA has done in providing quality education for the self-directed trader. If the CD’s are indicative of the quality of education I can expect from the live training. I’m enco… |
|
|
Sony Playstation Network Card – $50 $55.32 The Sony Playstation Network Card can be used to download games, movies, and more from the Playstation Store. In the past, a credit card was required for purchases from the Playstation Store. With the new Playstation Network Cards, users can shop the Playstation Store without needing a credit card. These cards can be used in the Playstation Store on both the PC and the online browser of the Playst… |
