SECURITY CENTER
COLUMNIST / BLOGS
TOOLS
PODCASTS/VIDEOS
How To Invest and Save Money
Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Taxes on capital gains will vary from state to state. Make sure to research your individual situation so you are aware of what taxes you are expected to pay. Know What Stock Gains Mean for Your Taxes By Britt Erica Tunick Description: Investing for the long term usually involves some sort of stock component. But before you go trying your hand at stock picking don’t forget that any money you make in doing so isn’t entirely yours. As with traditional income, Uncle Sam will be waiting for his share of any gains you make in the stock market - an important factor to consider prior to purchasing your first stock. Just as there are two ways investors can make money off of stock investments - through quarterly dividends paid to stock holders, or by selling shares at a higher price than they were purchased at- there are two ways the Internal Revenue Service and individual states tax such investments. When it comes to the quarterly dividends paid out by most stocks, since 2003 the standard tax rate has been 15%, with that rate rising to 20% for anyone with a combined income greater than $400,000. But taxation of income generated by selling stock shares for more money than an investor purchased them for is a bit more complex. Known as capital gains, such profits are subject to tax rates based on how long an individual owned the shares they have gained from. Profits from stock investments held for more than a year are considered long-term capital gains and are taxed at a lower rate than profits from equity holdings of less than a year, which are known as short-term capital gains. The amount investors must pay in capital gains is also highly dependent upon the state where they reside, as capital gains taxes in individual states levy on top of the Federal taxes for these gains which varies greatly between states. According to the Tax Foundation, in 2014 the top marginal tax rate imposed by the government for long-term capital gains was 23.8%, with the rates imposed by individual states ranging from zero in places such as Florida and New Hampshire to 13.3% in California. As a result, the total combined top marginal capital gains tax in the U.S. was 28.7% in 2014. For short-term gains, in 2014 investors were taxed at the same rate for their ordinary income. With such rates subject to change as Federal tax rates change each year it is important to contact your accountant to determine what rates you will be subject to regarding equity investments. Alternatively, such information can be found on the IRS’ “Publication 550, Investment Income and Expenses,” which can be found at IRS.gov or by calling the IRS directory at 800-829-3676. |
Archive |