Selling Stocks on NYStock Exchange...What are the tax implications for a sale under one year? Over one year?

Question

The government wants a part of the profits earned on stock gains, but what are the exact guidelines? I understand that it is 20 percent for a sale under one year. But how about if you hold for over a year? And, is the tax levied based on the entire cost of the stock or just on the profit made from the day of entry and exit from the stock?

Answer 1

The previous answers that you received are mostly correct, but not completely correct. Here are some additional data to help clarafy the situation. First of all the tax situation does not apply only to the NYSE. It applies to investments made on all exchanges. The minimum tax rate on long term investments, held over 1 year is 5% for joint incomes of under $60,000. The maximum is 15%. Dividends on most stocks, but not all, are also taxed at the long term capital gains rate currently. There are some few investments that do not qualify for these favorable rates. GLD and SLV are two, a couple of index funds. They are taxed at the collectables rates. Don't ask me why.

Answer 2

Less than a one year hold, gains are short term and are treated as ordinary income. You are taxed at your rate after all of your deductions. If held more than one year it is considered long term gains. Depending upon your income, you will be taxed at 15% or aslow as 10% on the gains. Cost basis (what you paid for the stock) is your net cost of the stock, plus brokerage fees. Sale of stock is again net to you, after brokerage fees. Any dividends received while holding the stock are taxed as ordinary income as well. There is no tax on stock gains in an IRA.

Answer 3

If you buy and sell stock within a year, your tax rate is at your ordinary tax rate of all of your earnings combined. Subtract the original purchase price from the final sales price. Pay tax on the difference.

If you hold a stock longer than one year, again subtract the original purchase price from the final sales price. You will have to pay 15% capital gains tax, on the difference, if you sold it for more than you paid for it.