stocks and taxes in the u.s?

Question

whats the differencee between the taxes you pay when you hold stocks, and the difference between the taxes you pay when you dont hold stocks? (im talking u.,s tax law.)

Answer 1

Your question doesn't reveal whether you're talking about difference in tax rates, difference in character of income, or something else. Other answers have dealt with specific handling of dividends, capital gain tax rates, etc. Let me be more basic, and talk about character of income.

Income is usually taxed as ordinary income, unless it qualifies under any of a number of provisions as capital gain. Stocks, bonds, mutual funds, etc. held by an individual are usually capital assets in such individual's hands, and consequently, qualify for capital gain or loss treatment. (However, if a person establishes himself as a trader in stocks, bonds, options, etc., his activity could be deemed to be a business, and his results would be taxed as ordinary income.) Presently, if such nonbusiness assets are within the definition of a capital asset, and held for more than a year, their sale qualifies for capital gain or loss treatment. Personal assets, such a collectible car that might appreciate in value, are also capital assets in a collector's hands, unless his collector business qualifies as a trade or business.

So I'm not attempting to quantify any difference you speak of, but instead help with definitions of the two major characters of income in the U.S. tax law--ordinary vs. capital.

Answer 2

When you HOLD stocks, the only taxes you pay are on the dividends.

When you SELL stocks, you pay capital gains tax. Depending on how long you held them, you might pay tax at the same rate as ordinary income (if you held them a year or less) or at a lower rate (if you held them over a year).

Answer 3

Dividends paid to you on your stock holdings are taxed at 15%. If you sell the stock after having held it for more than one year you pay 15% tax on the gain.
If you invest your money in bonds, cd's, money market accounts etc. you pay tax at whatever your regular tax rate is, up to 35%.