How big is the capital gain tax when selling stock in less than one year after purchase?
Answers:
Short-term capital gains are for stock held one year or less. They are taxed at the same rate as your ordinary income, from 10% to 35%. Long-term capital gains are on stock held more than one year. The tax on these will be anywhere from 5% to 15% depending on what tax bracket the rest of your income is in.
Sometimes however, even if you have held he stock for not more than one year you will still get long-term capital gains. For example if you inherited the stock any gain is automatically long-term. Also if you recceived the stock as a gift you take the donor's holding period, and if you received the stock in a tax free transaction such as a merger, your holding period for the new stock would include the holding period for the old stock.
At higher levels of income the tax rates become more complicated (and higher) because as your inome goes above certain threshhold levels you begin to lose some of your deductions. This in effect raises the rate on your capital gains above the rates quoted above.
If you are subject to the Alternative Minimum Tax in general your short-term capital gains will be taxed at either 26% or 28% and your long-term capital gains at 5% to 15% although here again at higher levv
els of income the tax increases because you lose some deductions.
Go to www.irs.gov and get publications 544 (Sales and Other Dsiposition of Assets) and Publication 550 (Investment Income and Expenses).
If you sell after one year or less, the gain is essentially treated like ordinary income and will be taxed at whatever rate is applicable for your total income - so that could be anywhere from 10% to 35% depending on your income.
It depends on your income... I think it's 15% if you're in one of the lower two income tax brackets, and your regular tax bracket at higher rates.
In practice it also depends on other factors as well-- if you're selling stock in which you have a 1k profit but have also sold stock with a 1k loss, the two will cancel each other out and you'll have no taxable capital gains.
If you sell stock less than a year after you bought it, and you made money from the sale, you will be taxed at your marginal tax bracket. http://www.irs.gov/formspubs/article/0,,...
shows you a chart of the tax brackets in 2006. In other words, short-term capital gains are considered "income" and would be taxed the same as money you made from a job.
If you sell stock more than a year after you bought it, and you made money from the sale, you will be taxed at a lower rate. If you are in the two lowest tax brackets for your income, you only pay a 5% long-term capital gains tax. If you are in a tax bracket of 25% or above, your long-term captial gains tax is 15%.
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