Capital Gains Tax for Newbie Investor?

[Dave]

I'm about to begin trading stocks (just a little) through an online broker, it's something that's always interested me, and now that I'm 18, I can legally do it on my own. I'm just worried about the capital gains tax. Having not paid an income tax yet, since there is no income (just investing some savings), that would mean I don't have a tax bracket. So I guess I'm still a dependent... but how am I going to pay the taxes?

I'm very confused and a bit worried going into it.

Thanks!

 

[BetapegLLC]

Don't be worried. You must report your capital gains income only when you sell your stock so if you rarely or never sell, you either don't pay or report anything, or you do it very rarely. Your broker is supposed to send you an IRS form already filled out with the amount you made in capital gains before April 15 (tax day). Filing your taxes is actually very easy. If you work, your employer gives you a form called the W-2 which has the amount you'v been paid in wages for the year and how much taxes were taken out of your paycheck. To file your taxes, you fill out an IRS form 1040. You use your W-2 to state your wages income on the 1040, and also, use the capital gains form from your broker, to state your capital gains income on the 1040. At the end of the 1040, you should know if you overpaid your taxes (in which you'd get a tax refund check HOORAY!) or you'd know if you owe more in taxes. Since you are a dependent though, things are easier for you. Just give the capital gains form to your parents (if you sold stock) and let them take care of it. Even if you work, if you are still a dependent, just give the broker form and the W-2 form to your parents.

 

[krn001]

There are short & long term capital gains taxes, if you buy & sell in less than a year you are subject to a higher tax of about 35% on your earnings. Long term tax is reduced to 5-15% tax.