If I buy and sell securities, do I get taxed on every sale?

Question

If I sell ABC company and buy XYZ company, am I paying income tax on my sale and then using the rest for XYZ? If I only buy a few shares, and I pay 12.99 per trade plus sales tax and income or capital gains, then how do make any profit? Had I better just do powerball with the other %99 of ameican serfs. Is this me hitting the glass cieling? Do I have to be born rich to make any money in this game?

Answer 1

Yep, you have to be born rich. Just kidding. You will be paying income tax on any GAIN, which is your sale minus commissions (your cost basis). If you keep the stock for a year or longer, you'll pay capital gains on any gain (max 15%) which is a lot less then your marginal tax rate. Also, ALL dividends (other than REITS) are taxed at the great 15% tax rate. So, you're SMARTER than the serfs if you buy a dividend paying stock, because you'll be earning extra $$ and paying less in taxes than you would if you got a second job, where you'd pay 28% federal tax, then tack on state tax, social security, etc.

Hang in there. Good question and always keep learning.

A great dividend stock is Allied Capital. Pays about an 8.5% dividend per year (ALD is the ticker).

Answer 2

You only get taxed on your profits of investing. Any losses that you have can be used to offset your profits. When you buy a stock, you have to include the commissions that you pay in th ecost basis of your stock. When you sell a stock, you can deduct the commissions from part of the proceeds.

For example, if you buy $1000 of company ABC, your beginning cost basis will be $1012.99. If you sell all of your shares of company ABC for $1300, you will get net proceeds of $1287.01. Your profit or gain on this transaction would be $274.02 which would be subject ot capital gains tax.

You shouldn't be paying sales taxes on any stock transactions. I don't know of any state that makes the purchases of securities subject ot sales tax.

You do not need to be born rich to win in the stock market. You will need to make informed decisions on which stock you buy and sell though. If you don't expect to get rich overnight in the stock market and use a lot of discipline, you can do well enough to make some good money.

Playing the lottery is a suckers bet.

Answer 3

Yes you pay taxes on each sale. You can net losses against gains for the year, and can add the transaction fees to the basis for the property, so those don't get including in the gain that you pay tax on.

As far as the people born rich, most of them probably have more stock transactions than the typical middle class person, so pay a lot more in capital gains tax.

Answer 4

If you sell the stock within one year of purchase, you're taxed at your normal tax rate. If you hold the stock for a year or more and then sell, you are taxed 5% if your federal income tax rate is 10 or 15% or 15% if your federal income tax rate is 25% or higher.

You'll also probably be taxed by your state and maybe even your locality.