What Tax Do I Need To Pay On Stocks Bought Online?
Wednesday, June 17th, 2009 at
4:59 am
I have recently bought stocks using Scottrade and want to know what how much tax I need to pay when I sell. As a college student, I am a dependent of my parents so will my capital gains tax be the same as theirs or because I currently have an income less than $7,000, I won’t be taxed.
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Three basic things you need to pay taxes on: 1) dividends 2) short-term capital gains 3) long-term capital gains. Dividends are the cash distributions the company makes to shareholders. Capital gains are the gains from selling the stock at a price higher than what it cost you. You are allowed to add fees including commissions within “what it cost you”. Short-term capital gains are based on sales within 12 months of purchase, long-term capital gains are based on sales of stock you’ve held for over a year.
Dividends have their own dividend tax rate, which is currently 15%. Short-term capital gains are taxed like regular income, and long-term capital gains are taxed at the capital gains rate, currently 15%. Whose rate you pay depends on how you and your parents file (the account holder will be responsible for paying so I’m assuming this is you). If you file separately, you pay your own rate.
If you manage to lose money through a capital loss, you can actually use up to $3000 of that loss every year as a deduction against regular income.
Really important fyi, always consultant your or your parent’s accountant/tax advisor instead of online forums if you have one, but this should be ok as a general guideline.
It depends if the account is under your name? If it is, then the government will tax you at your income tax rate, which I am assuming will be 10% (lowest one). If the account is under your parents name, they will have to pay taxes at their income tax rate. Note this is just for short term capital gains. If it is a long term (one year or longer) capital gain, then it should be a maximum of 15%, regarding less of your income tax rate. Hope this helps.
It depends on how long you hold it and how much you make. With $7,000 in income and being single that would put you in the 10 percent tax bracket. If you held it less than a year you would pay taxes at a ten percent rate on your gains. If you held it more than a year taxes for the 10 percent bracket are zero on capital gains.
Since your parents can claim you as a dependent you cant claim your personal exemption. Which is $3,650. for 2009 for someone filing single. You still have your standard deduction which is $5,700 for 2009 filing single. Subtract that from $7000, or whatever your income is, plus your long and short term stock gains to determine your taxable income
I’m not sure what the tax free amount is for scottrade but Id expect that your going to have to pay tax on it if it goes up, here are some solid stock picks for the second half of this year. http://davesstockpicks.blogspot.com/