What taxes apply to stocks and how long do u have to hold a stock for there to be no taxes?

Question

what is the capital gains tax

Answer 1

You do not pay capital gains tax each year, the tax is paid on the gain in the year of sale. You pay tax on the dividends each year in the year paid. If you hold the stock for more than one year, the gain on the sale is considered a long-term gain and taxed at a rate of 15%. If you hold the stock for less than one year, the gain on the sale is considered a short-term capital gain and is taxed at your applicable tax rate. Losses from the sale of stock are catergorized in the same way and can offset gains in the respective categories (long-term losses can offset short-term gains, but not vice-versa).

There is no holding period in which you will not have to pay any tax on the gain. The only way around that would be to hold the stock until you die and the person that inherits it would receive a stepped up basis.

Answer 2

you are dreaming right. You have to pay taxes on any profit made from stocks the only difference is the amount you pay with short term vs long term cap. gains.

Answer 3

There will always be taxes on the sale of a stock. How much you pay depends on if they are long term or short term gains. I think that's under or over a year. You don't pay until you sell the stock.

Answer 4

You have to pay capital gains tax on any stock holdings that increase in value (total net change for all stocks). There is no time limit; you have to pay the capital gains tax each year. If you take a loss, you can deduct from your income.

Answer 5

Generally there are two types of income related to stocks. Dividends and capital gains. Both are taxable but there are different rates and rules for each.

Many stocks pay dividends. There are two types of dividends, ordinary and qualified. Ordinary dividends are fully taxable as ordinary income in the year that they are paid to you or made available to you. Qualified dividends are taxed as long-term capital gains at a lower rate than ordinary income. The rate is usually 15% but is 5% if your tax bracket is 15% or lower.

If you sell a stock you may have either a gain or loss. If you sell it for more than you paid for it, you have a capital gain. If you sell it for less, you have a capital loss. How these are handled depends upon how long you held the stock.

Stocks (or any asset, for that matter) that are held for one year or less generate short term capital gains or losses when you sell. If you have a gain it is taxed as ordinary income at your marginal rate. We'll get to losses in a moment.

Stocks held for over one year generate long term capital gains or losses. If you have a gain it is taxed at a lower rate than your other income. Normally the rate is 15% unless your tax bracket is 15% or lower where it would be taxed at 5%.

Now on to capital losses. It's not unusual to sell a stock at a loss from time to time. Many investors have a mix of gains and losses to deal with every year. Any losses that you have will offset any gains for that year. You'd offset short term gains with any available losses first since they'd be taxed at a higher rate. Then you'd apply them against any long term gains. If you have an overall loss for the year, you just dodged the bullet on any capital gains taxes.

Any losses that exceed gains can be used to offset ordinary income as well, but only up to $3,000 per tax year. Anything over and above that must be carried forward to the next tax year where the entire process starts over again. Any carried forward losses would be used against gains in subsequent years with any excess up to $3,000 offsetting ordinary income with the balance if any carried forward again.

There is no length of time that you can hold a stock and avoid taxes altogether. The only affect that time has is in the determination of short term or long term gains and therefore the resultant tax rates.

If you leave your stock portfolio to someone in your will they will receive the stepped up basis as of your date of death. Any appreciation will go untaxed to the beneficiary as long as they sell it for the value on your date of death or a lesser amount.

The value of your portfolio will be taken into consideration for assessment of any Estate Tax, however. If any stocks need to be liquidated by the executor to pay any taxes or bills owed by the estate will be taxed to your estate or your final tax return in the year of the date of your death. A smart executor would sell any stocks that showed a loss first in order to benefit from the losses and avoid taxation on the proceeds. This would preserve any stepped up basis for the beneficiaries of the estate while hopefully providing enough cash to clear the estate's debts.

Answer 6

After one year the profits are at the long term capital gains rate. Less than that, it's regular income. You always have to pay something.