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I am planning on getting into the market for trading stock and building
a portfolio. When figuring short-term or long-term capital gains tax
this involves the sum of gain with total income for the year. This in
turn may move me into another tax bracket. Given this, when performing
trades in the market and if I do not withdraw this gain from the
financial institution, will this still need to be included in my tax
claim for the year or does this apply to only the funds in which I
withdraw from the institution?
Sorry for asking such a remedial question, and please correct me if I am
wrong.
Any help is greatly appreciated.
Adonis
Adonis Vargas wrote:
> I am planning on getting into the market for trading stock and building
> a portfolio. When figuring short-term or long-term capital gains tax
> this involves the sum of gain with total income for the year. This in
> turn may move me into another tax bracket. Given this, when performing
> trades in the market and if I do not withdraw this gain from the
> financial institution, will this still need to be included in my tax
> claim for the year or does this apply to only the funds in which I
> withdraw from the institution?
When you move money between accounts there is no taxable event.
When you sell a stock at a gain or loss, you claim that gain (loss) in
the year it occurred, regardless of whether or not you withdrew the
money or bought something else with it.
By the way, if you plan on 'trading stocks' you are likely to have more
losses than gains. Even the pros have a tough time beating the averages.
But that wasn't your question.
JOE
Adonis Vargas wrote:
> when performing
> trades in the market and if I do not withdraw this gain from the
> financial institution, will this still need to be included in my tax
> claim for the year or does this apply to only the funds in which I
> withdraw from the institution?
If you sell a stock in a taxable account, your broker will report the
trade to the IRS (and to you) on form 1099-B, "proceeds from broker and
barter exchange transactions." You must report these transactions on
Schedule D of your federal tax return and pay taxes, regardless of
whether you keep the money in the account or not.
Note that sometimes a sale is out of your control -- for example, if a
company whose stock you hold is taken over in a cash merger.
If you have an IRA, one strategy for avoiding this tax issue is to do
your stock-trading within the IRA, where the tax-deferred nature of the
account means you don't need to keep an eye on holding periods or
capital-gains tax issues.
-Tad
Adonis Vargas wrote:
> When figuring short-term or long-term capital gains tax
> this involves the sum of gain with total income for the year. This in
> turn may move me into another tax bracket.
In addition to the items that Joe and Tad have said, I'd also point out
that long term capital gains will not bump you into another tax bracket
since the taxes are figured separately. However, long term gains can
make you ineligible for other tax deductions that are based on income.
Short-term gains can bump you into the next bracket, though.
-Will
Will Trice wrote:
> In addition to the items that Joe and Tad have said, I'd also point out
> that long term capital gains will not bump you into another tax bracket
> since the taxes are figured separately. However, long term gains can
> make you ineligible for other tax deductions that are based on income.
> Short-term gains can bump you into the next bracket, though.
Oh, and I suppose long term gains could bump you up into a higher
*state* tax bracket, depending on the state.
-Will
I've pretty much migrated to index funds to control taxes.
When your investments are multiples of your income, the
tax fluctuations can be significant. I implement asset
balance by putting NEW money in appropriate places.
On Jun 14, 1:51 pm, Adonis Vargas <a...@R...net>
wrote:
> I am planning on getting into the market for trading stock and building
> a portfolio.
Trading stocks and building a portfolio are two different things. Get
to know each method and pick the one that's right for you. I buy good
company stocks at reasonable prices and hold them for long term (i.e.
building a portfolio). I don't worry too much about taxes.
> When figuring short-term or long-term capital gains tax
> this involves the sum of gain with total income for the year. This in
> turn may move me into another tax bracket. Given this, when performing
> trades in the market and if I do not withdraw this gain from the
> financial institution, will this still need to be included in my tax
> claim for the year or does this apply to only the funds in which I
> withdraw from the institution?
>
Once you sell a stock or mutual fund in a taxable account, it's a
taxable event, regardless of what you do with the proceeds.
> Sorry for asking such a remedial question, and please correct me if I am
> wrong.
>
> Any help is greatly appreciated.
>
> Adonis
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