when do you pay taxes on stocks?

Question

if i start to invest soon, i plan on investing in the marker and when ever i sell a stock and make money, i plan on putting the money back in to the market.

Answer 1

You do need to become familiar with the tax rules governing investments. They are important and they may have an impact on your investment decisions. First off, all dividends and realized capital gains are taxed for the calindar year in which they occur unless you are on a different tax calindar, which a few are. Those are settled on about April 15, which I believe you already know. Now here is the interesting part. Dividend from many corporations are taxed at a very favorable tax rate currently. About 1/2 the regular rate. But not all dividend receive this favorable rate. Long term capital gains are also taxed at a very favorable tax rate of about 1/2 the regular rate. Long term currently is over one year. If you manage to make a fair amount of money investing in stocks, you will have to file quarterly estimated taxes or face a penalty on April 15. Conseqently, you will not be able to put all of your money from your profits back into the market. There are a few exceptions to this rule. If the money you invest is in either a Roth IRA account or a traditional IRA account or a 401k account, you do not have to pay taxes on the earnings and capital gains when you realize them. In a Roth IRA, you never have to pay taxes. I will repeat this sentence to be sure you understand it. In a Roth IRA account you never have to pay taxes on the money that is earned in that account.

Answer 2

You are responsible for taxes on dividends when they are received and you record capital gains/losses when you sell the stock, even if you leave the cash on deposit with your broker.