Stock Markets Exposed

What happens if you make a lot of money in the stock market?

I am a small investor, but my wife and I were discussing what happens if some of our high risk investments pay off. Lets say we made 100K. What type of taxes are we looking at. Does the length of time we own he company make a difference? Generally speaking, what percentage of profits should be put aside for taxes? Can you pay taxes anytime?

Public Comments

1. Call the IRS and ask them, or a good tax consultant. You should have had this already researched before investing anything and expecting a good return.
2. No tax need to pay. Enjoy the money u got. That is your money and no has the right to take your money.
3. Investments can be short term or long term in nature.Those held for more than one year and then sold are considered long term capital gains. Those held less than one year are short term and taxed as regular income. You salaries and the $100K would determine which bracket your income places you. So get a 1040 form and read the instructions whic cover investments. This is the best way to learn the investment tax ropes.
4. yes you will have to pay taxes. you will pay more if it is a short term gain. tax amount depends on your total income.
5. There are two different types of tax structures involved with in stocks. Capital Gains tax and Dividend Tax. Let’s start with capital gains since dividend tax most likely won’t apply to you or your wife and I’ll explain why below once we get into explaining dividend tax. This is a term you often hear in real estate more than you do in stocks, but the simple short definition of capital gains is selling an asset for more than your purchase price, meaning the difference is profit or gain (this is what you get taxed on). Obviously if you sold an asset for less than your purchase price than it would be a loss therefore a capital loss (something you would still file as). Typically if you don’t sell your stock and you’re still holding onto it, you won’t get taxed until you do sell. However, it is important to note that there are two different types of capital gains tax and it is time dependent (just like in real estate). They are short term capital gains and long term capital gains. Unlike real estate, if you sell within a year of obtaining the stock, it is called short term. If you sell after a year, it’s considered long term. In real estate, the threshold is two years. Unless the tax rates have changed, the long term capital gains tax is between 5% to 15% depending on your total income and the income bracket you fall under as categorized by the IRS. Short term capital gains get taxed at a rate of 25% or higher so it is often vital for you to try and sell in the long term market. It is crucial to note that if you didn’t buy the stock and it was given to you as a gift or you inherited the stock, your “purchase” price is whatever the current market price is at, at the time of the transfer. You don’t obtain the original buying price of the previous owner unfortunately. Most people are unaware of this and screw themselves royally on the taxation. Of course the “purchase” price in this case is still 100% profit because you technically didn’t buy it. Anyway, if you or your wife ever fall in this category, be very careful on this. Dividends tax is tax on well, dividends. Dividends are payouts a company provides to it’s shareholders. This is the reason why I say it probably won’t apply to you or your friend. If you should ever fall under this category for any reason, the current tax rate on this is 15%, however, that is due to a tax-relief provision currently in state, if this bill is not renewed this year, chances are the tax rate will be equal to that of regular income tax. Please note that if you are and your wife are looking to get into the stock market, the IRS, in addition to all the tax rules I’ve listed, have what is called a “Wash Rule” in place. This is a specific rule specifying an investor can not sell a stock for profit only to buy back the stock within 30 days at a lower price to receive a gain. If you happen to buy back a stock within 30 days, the IRS will not allow you to offset for the capital loss resulting from the same stock in your taxes (loss because you would now claim ownership of the stock at a lower purchase price rather than at the higher purchase price). One important thing to note, in your overall stock portfolio, if you have more capital loss than capital gains, you can file and offset up to $3,000 off your ordinary income. Any amount over this dollar amount, may be carried over to future files but you can not do more than $3,000 for the year it’s filed in (unless rules have changed; check accordingly). These are the two primary ways I know of, but of course any tax advisor can probably give you more in-depth detail on how tax is broken down and possible have ways to offset more tax than I can possibly answer here. Finally, the amount of profit does not matter if it's $10k or $100 million other than what tax bracket you might fall under.
6. I can only give you an answer based on my own personal experience.When I make a few good trades,I get piggy and start to think of ways to really maximize my gains.Wham,Bang ,Pow.The stock gods again show me that I am the Lowest,Stupidest,and most undeserving loser ever.My doctor has me on antidepressants,but still some days I still want to jump.I havent yet because something inside of me tells me that life is worth more than money.I guess what Im try to say is that it is most insane form of gambling in the world,Good advice would be dont try drugs and for the love of God Please stay away from the Markets.P.S. Yes this answer is a call for help.