Taxes on Stocks (Beginners Guide)

Taxes on Stocks (Beginners Guide)

Welcome to tax teach today I’m going to Go over stocks in particular how stocks Are taxed in this video I’m going to go Over things you need to consider when You own a stock and how that might Affect your tax return also at the very End I’m going to go over how you report Stocks briefly I think before we get into things I want To describe what a stock is maybe this Is obvious but I want to start here a Stock is a partial ownership when you Own a stock you own a partial ownership Of a company So when you buy your one stock of Amazon You are a point zero zero zero zero zero You know onwards percent owner of Amazon And the IRS considers that as an asset Now that we know that the IRS treats you Owning a stock as you owning an asset There are some tax considerations you Should keep in mind when you own a stock I’m going to go over those Considerations you need to have when you Own a stock first thing you need to Consider is the holding period of your Stock Holding period means how long you’ve Owned the stock for and the holding Period starts when you buy stock the day You buy it the reason why it matters how Long you hold the stock for is because Depending on how long you own that stock You might get a different tax rate when

You sell the stock For example if you hold the stock for Over a year you there and sell your Stock you’ll qualify for long-term Capital gains tax rates which are lower Than your normal tax rates And if you sell your stock when it’s a Year or less holding period you have Different tax rates you have higher tax Rates You might not know this if you don’t Have a tax background and I wanted to Give you this information because maybe You’re thinking about selling a stock For a game a capital gain and you’ve Held it for you know less than a year if You wait until you own that stock for Over a year that can change your tax Rate from You know 10 to zero percent or it could Change your tax rate you know from the Highest tax rate to 20 I’m gonna go over In more detail the different percentage Rates but right now you should see a Picture of long-term capital gains rates Right here Versus your short-term capital gain Gains rates that show up here you can See there’s quite a bit a difference Between the two So the first item I wanted to highlight Is when you own a stock consider how Long you own the stock for because when You sell it there might be some tax

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Considerations you might be taxed at a Different tax rate the next thing you Have to consider is your stock base your Tax basis and your stock what that means Is when you buy your stock the cost of That stock is your tax basis and you Need to consider this because in the Future when you eventually sell your Stock you might either sell it for a Capital gain or a capital loss capital Gain is when you sell your stock for More than what you bought it for then a Capital loss is when you sell your stock For less than what you bought it for And like I said earlier depending on how Long you’ve held the stock for it Determines the character of the Capital Game right if you held your stock for More than a year that’s a long-term Capital gain but if you held your stock For a year or less that’s a short-term Capital gain and depending on you know What kind of gain that is there’s Different tax consequences right Different tax rates like I showed Earlier and like I’ll show now And the thing to note is stocks aren’t Taxed until you sell them right every Year you can see your stock go up in Value or go down in value but that’s not Taxable until you eventually sell your Stock these are considered unrealized Gains or losses Only when you sell your stock you get

That realized loss or gain and that has To be reported on your tax return and Consider it if it’s taxable the last Thing I want to go over now that we Talked about the holding period of the Stock and then also the capital gain or Capital loss of a stock The third thing I want to talk about is A more complex topic but I think it’s Something you need to think about at a Beginner level is the concept of netting What I mean by that is we have a Long-term capital gain and a long-term Capital loss or a short-term capital Gain short term Capital loss you will Have to report all those on your tax Return but you’re allowed to net them I’ll give you an example here Let’s say you own a stock for you own Two stocks stock a and Stock B stock a You bought for two thousand dollars and You sold it for three thousand dollars Right and you held it for longer than a Year so you get a one thousand dollar Long-term capital gain Stock B you bought also bought for two Thousand dollars but it didn’t go so Well and you ended up selling your stock For a thousand dollars and you held it For more than a year so that one Thousand dollar loss is a long-term Capital loss so stock a has a long-term Capital gain and then Stock B has Long-term capital loss both a thousand

What you need to do when you’re Considering your tax calculation is you Net these on your tax return you’ll Report both these transactions and at The end you’ll have a zero gain or loss Netted and so you don’t have any taxes On those uh the stock sales This concept of netting gets pretty Complicated when you have short-term Capital gains you have long-term capital Rate capital gains and there are Ordering rules but I wanted to make make This concept A word for you all at a Very beginner level just know that you You can net your gains and losses the Last thing I want to go over is Dividends when you own a stock a lot of Companies will give you a dividend which Is a partial share of the company’s Earnings because you’re the owner you’re Entitled to some of these earnings when There is a dividend and when you receive A dividend there are some tax Considerations if it’s an ordinary Dividend It’s taxed at normal tax rates depending On what your income level is now if you Get a qualified dividend from a company That is taxed at long-term capital gains Rates which will show up now A quick concept I wanted to go over a Little simpler than other things I went Over but just know that when you receive Dividends those are taxable now that

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We’ve gone over tax considerations you Need to have when you own a stock I want To talk about how you report a stock Sale on your tax return If you sell a stock during a tax return Year you have to report that on your Form 89.49 as well as your schedule D of Your form 1040. When you have a brokerage account where You buy and sell stocks a lot of times That brokerage firm you know TD Ameritrade Fidelity Weeble Robin had all These different brokerage firms they’ll Provide you a form uh 1099 B with that 1099 B does it shows you all the stock Sales you’ve had during the year and Other kind of brokerage related Information and that makes it easier for You to report that on your tax return if You’re using a tax service like uh HR on Our block Turbo Tax they make it pretty Easy for you to just to look at that 1099b and put that information into the Tax software That’s that’s I wanted to provide you That comment let you know about How you report your stocks on your tax Return just a quick little overview not And not an in-depth but something that You should know of know about that Concludes the video I hope you found the Video Informative when it comes to Understanding the tax considerations you

Need to have when you own a stock as Well as briefly going over How to reports a stock sale on your tax Return as a reminder this is a very high Level video I wanted this to be a Starting point for your understanding of How stocks are taxed I think it’s Helpful to talk to a tax professional or You know a go and attack site like TurboTax or H R Block they’ll provide You more details on this more in-depth Details I wanted this to be a starting Point for for y’all’s Journey when it Comes to understanding stocks Thank you all for watching the video and I’ll see you all next video

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