Taxes and fees when investing stocks

Taxes and fees when investing stocks

Taxes and fees are part of stocks investing. They are in the same line with profits but on the opposite sides. Just like fate and destiny which are two separate dots in the same line. A line of life. Fate is constant and cannot be changed. However, destiny is what you design and is something you can change. 

In order to be prosperous, a trader must know his open choices, that is fate. But he can pick the best one for him, which is destiny.

The key way to make money in the stock market is by buying low and selling high. This is a kind of relationship between fate and destiny.

You have to sell your stock for more than you paid for it, in order to gain a  profit. This profit is a taxable capital gain. You can lessen the amount of your taxes by decreasing some costs connected with investing, but you can’t diminish transaction fees.

The question is what you have to pay and when?

If you play the stock market you have to know a bit about the taxability of your securities transactions.

One of the best tax opportunities in investing is that no matter how big a nominal profit you have on a stock you own, you don’t have to pay taxes until you sell your them. Once you do, though, you’ll owe capital gains tax, and how much you’ll pay depends on a number of factors. We will show you the essential factors in defining how much tax you’ll owe after a stock sale.

Capital Gains Tax

Any profit you gained from the sale of a stock held year or more is taxed.

If you live in the USA

For US residents it’s 15% if you are in a 25% or higher tax bracket and 5% if you are in the 15% or lower tax bracket. Profits from stocks held for less than a year are taxed at your ordinary-income tax rate.

Brokers can help you determine your capital gains.

Regular dividends are taxed at regular income tax rates, not at capital gains rates. 

But, “qualified dividends” are taxed at the capital gains rate of 0% to a maximum of 15%. The dividends to be rated as “qualified” must be paid by a U.S. company or an adequate foreign corporation. Also, the holding period must be more than 60 days. Check with your broker to see if the dividends for your stock holdings are “qualified.” Dividends on stock held in a qualified retirement plan are not taxable income.

Taxes and fees if you live in the UK

But if you live in the UK you do not usually need to pay tax if you give shares as a gift to your husband, wife, civil partner, or a charity. You will need to pay taxes if you invest thru eToro and to better understand how things work, AskTraders curated a guide on eToro UK tax.

You also do not pay Capital Gains Tax when you dispose of:

  • shares you’ve put into an ISA or PEP
  • shares in employer Share Incentive Plans (SIPs)
  • UK government gilts (including Premium Bonds)
  • Qualifying Corporate Bonds
  • employee shareholder shares – depending on when you got them

In the UK some assets are tax-free. You also do not have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.

Disposing of an asset includes:

  • selling it
  • giving it away as a gift, or transferring it to someone else
  • swapping it for something else
  • getting compensation for it – like an insurance payout if it’s been lost or destroyed
Taxes and fees if you live in Germany 

In case you invest in Germany and you are a resident of that country, you have to know several things about taxing.

Germany has a strong investment culture, with products ranging from the excellent to the downright questionable. So much so that an investment here should be seen as an entrepreneurial exercise with ‘investor beware’ as a password.

It is usually helpful to use a ‘platform’ to manage German investments. The collection of dividends and payments from stocks, bonds and funds is automated and efficient. Above all, the annual costs of using a platform are low.

On 01 January 2009, Germany started a 25% investment tax which includes all capital gains and income from investments started into after that date. It resulted in a reduced reply from investors whose portfolio values had fallen very much. 

There are some exemptions to the general dearth of tax sparing schemes. For instance, double taxation agreements between Germany and other countries, produce potentially beneficial tax cuts or investment in property. It is essential that all international investors should ask a tax specialist before making any decision about investing in the German market.

Wherever you live the things may get complicated

Several situations, that are common for all investors, frequently look to make tax estimate more complicated. 

The price you practice to define gain or loss can be changed. 

If you inherit shares, for example, you have to interpret them in the same way as other capital gains tax assets. Also, some firms offer payments to stockholders that are applied as the return of capital. That will make your tax cost as decreasing.

Further, there are some other regulations connected to gains and losses. 

Trading the stock and collecting a profit is forever nice, but it appears with a tax knockout. You have to know that before investing

Quiz yourself about Taxes and fees when investing stocks in the following quiz:

When unsure what's the right move, you can always trade Forex

Get the number #1 winning technical analysis ebook for trading Forex to your email.
Containing the full system rules and unique cash-making strategies. You'll be surprised to see what indicators are being used and what is the master tuning for successful trades. Including case-studies and images.
Price Action Trading - Myths and Truths Price Action Trading Blueprint
  • FREE (PDF) Download
  • Patterns & Candlesticks Cheat Sheet
  • Impulsive & Corrective Moves
  • And Much More