Penny Stocks Trading

Penny Stocks And Taxes

I’m going to explain to you taxes on stocks from a very basic overview as if you knew nothing. Since we have a whole series on investing in the stock market for beginners, I thought this would be an appropriate time to write this article about taxes on stocks from a very entry-level very basic level overview. If you didn’t know, my name is Brian Kim. I’m a Certified Public Accountants and owner of multiple tax practices, I’m helping you get started in the stock market. 

Let’s begin, I’m going to go over frequently asked questions that my clients asked me. Here we go taxes on stocks.

 Will I pay taxes on stocks? If I don’t sell my stock?

 The answer is no. If you don’t sell your stock, and the value increases, that’s called an unrealized gain that’s opposed to if you do sell the stock, that would be a realized gain, you’re only going to have tax consequences when you have a realized gain. In other words, once you close the position, so you bought the stock, and then you sold the stock, then you realized the gain, which is why they call it a realized gain, you’re only going to have tax consequences and pay taxes on realized gains. So if you just bought the stock, and you hold it, and it increases in value, when the year ends, you’re not going to pay taxes on that it’s just going to be an unrealized gain that you have not realized yet. That’s a good question. That’s a frequently asked question, but the answer is no. taxes on stocks. 

Will I pay taxes on stocks? If I sold my stock for profits, but I left it in the brokerage account?

 The answer is yes. If you sold the stock for profits, and you just left the money in your brokerage account. In other words, you did not withdraw that money from your brokerage account back to your bank account. Even though you didn’t withdraw the money from your brokerage account back to your bank account, you’re still going to pay taxes on the realized gain. Because again, it’s about when you close your position. It’s about when you realize the game is not about the money movements, not about the money flow from the brokerage account, back to your bank account. So the answer is this is kind of intertwined with question number one, you’re going to pay taxes when you have a realized gain, and what you do with the money afterward. That’s up to you, that’s not going to affect the tax situation. So if you sold it again, you realize the game and the money still sitting in your brokerage account, you’re still going to pay taxes on it, it’s still going to be subject to tax taxes on stocks.

How much in taxes? Will I pay on my stock gains? 

This is this could be very complex, this could be a very complex answer. It depends on your situation. In a nutshell, how much you will pay taxes on your stock gains, it’s going to greatly depend on how long you hold that stock. If you buy the stock, and then you sell the stock for a game within a year, so under a year’s worth of time, then you will be subject to short-term capital gains, which are going to be your regular tax rates. So if you buy the stock, and they sell the stock A year later, or after a year, you will be subject to long-term capital gains. Long-term capital gains are much favorable tax rates, therefore you’re going to get better tax treatments. If you have long-term capital gains, and again, it just depends on how long you hold the stock. So if you buy and sell under a year, you’re going to get subject you’re going to pay taxes at a normal rate. If you hold it for a year or more and then you sell it and then you get profits. You have a game. You’re going to pay a better tax rate than better tax rates because you’re going to be subject to long-term capital gains.

That’s a very abbreviated Did or simplified version, there’s also a thing called the 0% long-term capital gains rates. But it depends primarily on your holding period, which’s going to dictate the tax rates that you will be paying on your gains. taxes on stocks. 

 What happens if I sold my stock for a loss? 

If you sold your stock for a loss, that’s unfortunate. However, for tax purposes, losses are good. So you do not want to ignore your stock losses. Because your stock losses are deductions, deductions are good, because they reduce your taxable income. Therefore, don’t forget about your stock losses. Your stock losses will offset any other stock gains or investment gains known as capital gains, therefore, your stock losses are important. And don’t neglect them. We’re not going to go into the mechanics behind how much you can deduct and all the scenarios about tax-loss harvesting. But, if you do have stock losses, you can use them to your benefit because they will be deductions. So please keep that in mind. taxes on stocks. 

How do I reflect all this buying and selling of stocks on my tax return?

 within your brokerage account, you’re going to be buying stocks selling stocks, buying, selling, buying, selling making money on this trade, losing money on that trade, and so on. All this information will be given to you on a tax form called 1099. B as in boy, so 1099 b, this tax form will be provided to you by February 15. After the year closes out, you’re going to take this tax from the tenant name B, and then you’re going to either plug it into your software, your TurboTax or you’re at home software, it’s going to be very straightforward. It’s like plugging in the information off of any other tax form. Or much at-home software’s they offer you the ATO where you auto log in and then the auto Import Options where you can download this 10 A and B data directly from the brokerage account. And another option is if you have an accountant, you just provide your accountants, the 10, the IB tax for all that all the information about all your investments, that’s going to be summarized for you including the interest including the dividends, including the capital gains, it’s going to be showing you short term capital gains long term capital is all the details of your brokerage connectivity will be summarized for you on this 1090 I beat you just need to remember that you have it and then make sure you include this information on your tax return. 

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