Stock question!?

Question

Two question on stock trading thru online brokerage:
1. How much do you have to pay taxes when you make money in stocks online, when buying and selling them?
2. Can you buy after-hours, let's say when you hear some news about some company? If yes, what price do you pay? closing price, or current after hour price? how does it work?

Very new in online stock trading.

Thanks

Answer 1

In the US, how much you pay in taxes depends on how long you hold the stock before selling it. If you own it for more than a year, you pay "capital gains" rates, which are either 5% or 15% depending on your tax bracket. If you own it for less than a year, it's treated like ordinary income the same as salary, interest, etc. so the rate will depend on your tax bracket.

You don't pay the tax at the time of the transaction. You pay it when you file your tax return.

With many brokers, you can place orders for the after-hours market. The price you pay will be the current after-hours price. If you do that, you should always use a "limit order". On most days, there's not a lot of trading after-hours, so if you use a market order, you might get a very unfavorable price.

*UPDATE* If that other answerer is paying 35% on short-term gains, then all I can say is congratulations on having such a high income. You'll only pay 35% if you're in the 35% tax bracket (which this year means a taxable income over $349,700!) For those of us with far more modest incomes, both the long-term and short-term rates do indeed depend on your tax bracket. See this nice summary from Bankrate.com: http://www.bankrate.com/brm/itax/tips/20010305a.asp

Answer 2

Here in Canada, you only pay capital gains when you sell your stock at a profit, and only 50% of your gains are taxed. If you sell stocks at a loss, you can use that loss to offset your gains.

You can put in orders after hours, but you cannot buy while the stock market is closed. If you put in an order tonight, it will be processed tomorrow morning when the stock market opens. By default you will pay the opening price or whatever someone is offering, although you can put in special orders to only buy below a certain price.

Be aware that a lot of people will have heard the same news as you, so there will likely be a big spike up in the morning and you'll end up paying a higher price anyway.

Answer 3

1) Capital Gains has NOTHING to do with your tax bracket. The IRS has three tax levels: Income, Portfolio and Passive. Your tax bracket only falls in the Income Tax level. Investments in securities falls in the Portfolio level. Additionally, it makes no difference who you buy and sell your securities through, the same tax will fall on them. If you own a security for less than 365 days, than you will owe short term capital gains, which is 35%. If you sell a security after owning it for more than 365 days, you owe 15% on the capital gains. NO brokerage will automatically take that money out for you. You will get a 1099 form come tax season from your broker, and it will show your tax obligations.
2. After-hours purchasing is done primarily by Mutual Funds, as they do not trade during the day. Now for the individual investor, you can engage in what is called Extended Hours Trading, and it generally runs until 8pm EST. And some of the early morning trading starts at 8am EST. Now there are risks inherent within this: decreased liquidity, partial order executions, etc. Moreover, there may be fees inherent within operating at these times in addition to the normal commission levels. You would need to check with your online broker to see what these all costs. Generally though, there are blocks on stocks you hear in the news that preclude individual investors from gaining access to them in the extended hours market....so it may not be worth it.

On a side note, there is talk from the NYSE and the NASDAQ to extend the hours on the trading floor. What those will be is unknown at this point...there is even talk of a 24 hour equity market. Which would be nice, cause that is primarily the only reason I am in Forex...well that and the margins.

hope this helps
good luck

Answer 4

How much you pay in taxes has nothing to do with a broker that is "on-line" or not. It comes down to two points;
1. Short Term (held less than one year) will be based on your earnings rate.
2. Over 1 year. Based on the "capital gain rate.

You can buy and sell "after hours". You will usually be making a big mistake by doing so.

Take 6-12 months to read as many books as you can on investing. It will save you a ton of money!

Answer 5

Apple. they are prime proper now but when your time period is past january they are a no-brainer. Did you understand the iPhone used to be the most important promoting cell within the US final month? That, and it is implications, isn't but priced in.. and nor is Apple's marketshare being on the tipping factor and approximately to blow up. 185 now. 240+ through Jan.. (and if you are fortunate you can get a dip to shop for at a160 inside the following couple of weeks).