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Tax on stocks - What's the big deal?!

K

Kenji4861

Banned
I started to trade stocks rapidly the last 3-4 months. I just got tired of waiting for "long term investment."

I would just buy 1000 shares, when it goes up $1, I'd sell it for the $1000 profit.

My co-worker keeps telling me that I will get screwed on tax.

I think - doesn't matter how much the tax is, I would always come out with some positive number right?

My coworker told me there is a chance, I can come out even and not make anything.

How does that work!?!
 
uh, no. if you made $5000 extra from stocks , then at most (generally) , you'll have to pay no more than 28% of that $5000 in extra taxes this year
 
how much is capital gains tax? i thought it was some high number, in the 20s-30%. but i'm not sure and could very well be wrong.
 
Well the most you can get taxed is 50% Add in any necessary trading fees, you should always make some money.
 
Tax isn't your real problem, when you're playing with such small amounts of money (and shares) commission is your worst enemy.

Yes, it would be impossible to come out negative if you sold for more than you bought & only had to pay tax.

Unfortunately it doesn't work that way.

Viper GTS
 
You won't lose money, but between taxes and commissions, you might find you don't make nearly as much as you thought you would.

I think what your friend is referring to is that capital gains are taxed differently from dividens, etc, and it is often more efficient to hold stocks in profitable companies than to buy and sell on small gains. Of course if the $1 increase is on a $3 stock price, then your profit is still pretty good compared to the expected payout of a $3 stock.
 
If you hold it less than a year, the profit is basically treated like income, and taxed at the same rate.
If you hold it more than a year, it's taxed at capital gains tax rate, which is 18% I think.
Someone can correct me if I am wrong.
 
You also get screwed because you are not withholding tax on the gains. Unless you pay an estimated tax each quarter, you will get penalized.
 
Those who believe daytrading is the best way to invest also believe the martingale to be the best way to gamble.

 
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