How do investment taxes work?

[rktect1]

I have not really had to worry too much about this as my TSP account wont be taxed for years. Plus all of it will be taxed cuz it is pretax $$$$

And I never gave it too much thought on my outside investments in stocks or mutual funds either, just because.

But how exactly does this work?

Lets say that I take $1 that I earned from my job, taxed, and invest it in a stock. 3 years later it is worth $2.

I sell the entire stock. What do I owe?

I sell half the stock. What do I owe?

 

[WorkFE]

Depends. Did you pay tax on the dividends earned? In any event you pay taxes on the gain. 1 dollar is the gain

 

[Birchtree]

If you keep your adjusted gross income under $400K you are required to pay 15% on any long term (more than 12 months holding period) capital gains. Dividends are treated the same way in that they are taxed at 15% with no holding period. If you keep your AGI under $250K then you can avoid the Obama 3.8% surcharge for Ocare. If you make too much money then the capital gains rate and dividend tax rate is 20% each. So if you sell a stock with a capital gain of $1.00 you'll owe a tax of $0.15. Even a tax of 15% hurts a greedy guy like me - I want to keep it all.

 

[Scout333]

Don't know how many tax nerds we have out there but this is a great article for those interested in some tax planning for 2013 and the future. Fairly significant changes in brackets, new investment tax, etc. Most won't hit us currently but could in the future as we grow our TSP and other investment accounts.

New Brackets, Net Investment Income Tax Expand Scope of Tax Planning