, The Green Pennies Stock Report: Taxes - How To Plan Ahead


Monday, August 7, 2017

Taxes - How To Plan Ahead

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 When you actually make money from the stock market, the money that you make will be taxable. There are too ways this overall profit will be taxed depending on how long you held onto the stock. If you held onto it for less than a year, then you’ll get taxed more than if you held onto it longer than a year. You can think of it as a bonus (or a tax cut) if you can hold onto the stock for longer than a year. When it comes down to how much you’ll be taxed on your gains, it depends on a lot of things.

First off, you'll need to find out what level of tax bracket you're in. If you're in a higher tax bracket, you will likely have to pay more in taxes than you would otherwise. Also, depending on how long you've held the stock before actually selling it, you might end up having to pay the capital gains tax instead of your standard tax rate. This is important because you'd have to pay more through the capital gains tax. 

I’m not a tax professional. I urge you to do some research in regards to this on your own. From what I can tell, you pay depending on where you are in their tax bracket (the amount you spend on taxes is dependent on how much you made for the year) as well as where you live. There are sites out there that should be able to help you further in estimating how much you’ll have to pay. In my experience, I suggest always keeping at least 1/3 or more of your profits on you during tax time. This way, you’ll be able to play it safe.
              Lastly, there’s an awesome rule out there that says that if for the year you lost money, then the next year you made money, the money that you lost will act as a tax write off. The money that was yours that you invested isn’t taxable (because you didn’t make it). Also, (to my knowledge) you can write off how much you paid in commissions as if it was a loss. When it comes to tax time, TDAmeritrade sent me a sheet with all my earnings on it. From here, it’s just a matter of inputting those numbers into your tax forms, and you’re done. 

Knowing how much you will have to save from your profits is very important because you don't want the IRS to come asking for more money than you have. Just like owning a business, taxes aren't automatically taken out for you. Instead, you have to manually take that money out and put it in the back. If you can figure out how much in taxes you owe before hand, you'll save yourself from a very nasty headache down the way. A very conservative number is to put 1/3 of your profits into a separate bank account.

Next: Corporations and Stock 
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