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!

 

[StephenWeinstein]

Your tax bracket is probably going to be 15%. However, long-term capital gains are taxed at a lower rate than other income.

At the end of the year, you report (either on pieces of paper called forms or on a computer program) the amount of interest that your savings account earned, the amount of money that you were paid each time you sold stock, and the amount that stock cost you. A lot of math is done to calculate the tax (if you use a computer program, it will do the math; if you use the paper forms, you do the math). You then write a check for the amount of the tax and mail it to the IRS, or you enter some information about your bank account into the computer and have the money electronically withdrawn.

 

[the tax lady]

If you are a dependent and have no wage income, you can have $900 in investment income before you will owe income tax. This is because your standard deduction is merely $900.

If you are a dependent and you have wage income, you standard deduction floats between $900 and $5700. If you have $3000 in wages, your standard deduction would be $3300. This means that any investment income above $300 would be taxed.

At first, the tax rate on a short term gain would be 10%.

If your investment income is $1800 or more, your taxes on the amount above $1800 would be at the tax rate tht is higher--yours or your parent's.

PS, if you sell stock, you will get a 1099-B. This will show wht you sold, but not what you paid for it. If your proceeds are more than $900 (see above), you *must* file a 1040 with a schedule D to show the actual gain or loss.