Here is the question this post is going to provide answers to; do I have to pay taxes from stock trading? The answer is YES. But there is more to this. When your shares are just on paper, you’ll not be asked to pay taxes.
You pay taxes after you have sold your shares not when it is still on paper. And you can determine what your taxes would be before selling your shares.
There are ways you can by yourself determine the taxes you are going to pay. You may also decide to get a broker to help you with the calculations. Below are things you should know about paying taxes on stock trading in a simple way.
Understanding capital gains
Your capital gains are what determine the amount of taxes you are going to pay, which are the profit made after selling your shares. To know what you will be paying, subtract the amount you sold your shares from that which you bought it. If there is profit after the subtraction, then you will be requested to pay tax on it. But if you made a loss after the calculation, then not only will you be free from paying tax but you can subtract the amount from other future capital gains.
Long and short-term capital gains
If you are in a hurry to sell your shares that are a year or less than a year old, think twice about it. Taxes on short-term capital gains are higher, so your returns may not be encouraging. Short-term capital gains refer to shares that at least a year old or less before they were sold out.
Taxes on long-term capital gains, on the other hand, are lower. Long-term capital gains refer to shares that are more than a year old. However, if you fall within the tax bracket of 10% – 15% then you will be asked to pay 0% on capital gains taxes, while tax bracket for 25% – 35% pays %15. Those within the tax bracket of 39% will pay just 20%.