Investing Advice & Taxes

[Bardlebee]

Hello TSLA holders. I am new to investing in general and I had a few questions about your various feelings about TSLA and general stock trading tips. If you also have websites or literature on stocks in general, please let me know as I have only been doing this for a year.

My main question that I have in my head right now is how severely I will be taxed if I sell my holdings. I have searched online for just an easy chart that will tell me how much I will be taxed by the government (depending on long/short term holdings) when I eventually sell my shares. I have come up empty handed, does anyone know?

To give you a little background of my "testing the waters" stocks. I have stock in TSLA avg. about 29 dollars and I would like to go long term with it. Obviously TSLA is pretty volatile so I also think I can get profit from its highs and lows, but I stray away from that because in the end I feel TSLA will get bigger and bigger and I simply think I am not seasoned enough to play the market like that. Long term seems to be my thing, but say if I hold a stock like TSLA for long term, such as next year and sell about 10k dollars worth, how much will I be taxed?

Luckily I also bought stock from SCTY when it opened up the first day, I have been happy about that stock too, but I face the similar dilemma.

Is there any site that has an easy to read chart or perhaps literature on the new tax laws for when I do decide to take profit? Also, general sites or books for new traders would be fantastic as well.

 

[RABaby]

Taxes on gains is pretty simple. Short term is added to your total income and the tax calculation is based on adjusted gross income. How much you pay all depends on your AGI. Long term is taxed at 15%, unless tax laws change so you don't add it to your gross but the tax on LT gains is added to your other taxes. And there is always the additional tax with Alternative Minimum Tax. The easiest way to estimate taxes is to create a dummy form on TurboTax and enter different numbers. You can do everything with the paper forms, but things like AMT and different considerations you may overlook are automatically (kind of) addressed with the program.

Now, going for long term gains and holding may be the best choice, but if you can churn your holdings, you could easily generate more money over the course of a year that would cover the additional taxes. There is always risk, but doing calculations and estimating return will assist in giving you a direction for investing and taxation. There are two basic ways to invest in a stock that you have faith in: Buy it in a Roth or IRA and churn it, avoiding the tax issues; Buy it in a regular account and hold for longer term growth and minimize the tax hit. I happen to own TSLA in both an IRA and margin account and if I sell, it will be in my IRA. If I sell, I would wait until it drops enough to make it interesting again. As long as TSLA is a good stock to own, I will keep what I have in my brokerage account.

 

[fengshui]

To provide some clarity, here's the answers for 90+% of people. For exact information, see IRS pub 550: http://www.irs.gov/pub/irs-pdf/p550.pdf
Stock held up to 1 year: Gain taxed as ordinary income.
Stock held more 1 year and a day or longer: Gain taxed at 15%.

There are special rules if you sell at a loss, so we'll assume that you have a gain.

As RABaby notes, taxes are paid based on the law in effect when you sell, so if Tax law around capital gains changes in the future, this will be different.

 

[Bardlebee]

To provide some clarity, here's the answers for 90+% of people. For exact information, see IRS pub 550: http://www.irs.gov/pub/irs-pdf/p550.pdf
Stock held up to 1 year: Gain taxed as ordinary income.
Stock held more 1 year and a day or longer: Gain taxed at 15%.

There are special rules if you sell at a loss, so we'll assume that you have a gain.

As RABaby notes, taxes are paid based on the law in effect when you sell, so if Tax law around capital gains changes in the future, this will be different.

Wow, thanks guys for this information. This was wildly different then I thought. I had thought you get heavily taxed on gains that are shorter then a year. Knowing that it just equates as income helps. I will give that PDF a read.

Thanks!

 

[avatar]

I thought that the capital gains rate for 2013 has gone up to 22% ? (20% + 2% Medicare tax on high income earners?).

 

[RABaby]

avatar, you are correct. For those single filers with incomes in excess of $400,000 or married filing jointly exceeding $450,000 the capital gains tax goes up - actually to 23.8% (20 + 3.8) but I didn't offer that because I assumed anyone in that bracket already had experience with capital gains and understood the tax considerations. Tax questions always have lots of variables and it is easier to keep it simple. However, as fengshui demonstrated, I failed to keep my simple answer simple.

 

[Bardlebee]

avatar, you are correct. For those single filers with incomes in excess of $400,000 or married filing jointly exceeding $450,000 the capital gains tax goes up - actually to 23.8% (20 + 3.8) but I didn't offer that because I assumed anyone in that bracket already had experience with capital gains and understood the tax considerations. Tax questions always have lots of variables and it is easier to keep it simple. However, as fengshui demonstrated, I failed to keep my simple answer simple.

Your answer was fine and it was well understood. It's true I would be perhaps have a Tesla if I was at that level. Hopefully next year I will be driving my Model S

As a younger person however I can dream. This is where the disconnect was, I had heard capital gains went up but couldn't find info. This really helped with that. While me and my wife make great money together, we don't make THAT much. haha.