Taxes?

[Aaron]

Ok, so I already know that my business gets raped on taxes to begin with from our wonderful government.  How does it work with stocks?  Am I correct in saying that every time you pull a stock (with a profit) that regardless if it is put back into something right away it is taxed?  So lets say I bought BHWF last week, it just pulled me a 77%  profit return and I took that out and divided it up between other stocks.  Am I taxed on that the net profit?  The answer is probably yes but I just wanted to get investors answers since I am new to this.

I'm sure the losses and profits will weigh one another out if they are about equal, but how do you avoid giving all your money to the government if you don't have some sort of retirement acct setup?  that is if all you have is gains and little loss.

[Dr PennyStock]

Here in Germany you pay 52% of the net profit, I pay a LOT of money every year, don't know in other countries.

[Chris_Ben]

How do you avoid paying taxes?  Is that a serious question?  If you ever figure it out, let me know!!     Anyway - here is what the IRS says about capital gains:

Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.


Net capital gain is the amount by which your net long-term capital gain is more than your net short-term capital loss.


The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income and are called the maximum capital gains rates. For 2007, the maximum capital gains rates are 5%, 15%, 25% or 28%.


If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).

[Aaron]

inevitably you are going to pay taxes regardless.  What I was asking was will I get taxed on every short term investment that pulls a profit and is immediatly tossed back into the market in the form of another stock? 

[Chris_Ben]

inevitably you are going to pay taxes regardless.  What I was asking was will I get taxed on every short term investment that pulls a profit and is immediatly tossed back into the market in the form of another stock? 

Your tax will be on your net profits for the year.  (totals gains minus losses)

[montyguitar]

Great question Aaron.  I was wondering the same thing.  I haven't had to worry up to this point as all my stock picks went south....but I'm learning.  The Doc is very helpful with his insight.  Good luck.

[Aaron]

Ok thanks CB, thats what I needed to know.

[Dr PennyStock]

Here in Germany what counts is the net profits for the year, makes sense, they will not see every trade we do.

[Chris_Ben]

Most online trading sites will automatically fill out your necessary taxes for for you so all you have to do is print them off.  Its a nice feature. 

[Aaron]

Here in Germany what counts is the net profits for the year, makes sense, they will not see every trade we do.

see thats what I figured when i started this whole thing, but I got some mis-advice on the subject and people were telling me different things... so far CB is the only one who's made any sense lol

[Chris_Ben]

My initial post was copied and pasted right from the IRS website word for word.  The percentage that you pay is based on whether or not you had long term or short term gains.  The short term gains are taxed higher.  It also depends on your income level and amount you make on trading. I didn't search those exact amounts out, but when it gets closer to tax time I will do the research and post it here for everyone as I learn the ropes too.  FWIW, I am an accountant who works for the government.  I just dont do taxes - I do auditing and consulting. 

[Dr PennyStock]

How do you avoid paying taxes?  Is that a serious question?  If you ever figure it out, let me know!!   Grin 

  For an accountant who works for the government is not bad  We want all the same 

[Aaron]

My initial post was copied and pasted right from the IRS website word for word.  The percentage that you pay is based on whether or not you had long term or short term gains.  The short term gains are taxed higher.  It also depends on your income level and amount you make on trading. I didn't search those exact amounts out, but when it gets closer to tax time I will do the research and post it here for everyone as I learn the ropes too.  FWIW, I am an accountant who works for the government.  I just dont do taxes - I do auditing and consulting. 

Great.... the best form of government IRS employee.... the auditor!!! lol

well at least we get some insight as to how it works from the horses mouth.  Thanks for the help CB

[Chris_Ben]

Oh no!  no taxes at all.  I look at government programs!

[Aaron]

Oh no!  no taxes at all.  I look at government programs!

so.... $20,000 for a toilet seat?  $10,000 for a hammer type programs? lol  i'm just busting your balls.