A question about taxes

Discussion in 'Investing' started by Picklepie, Nov 20, 2020.

  1. Picklepie

    Picklepie New Member

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    Lets say ive invested 50k in stocks, and my stocks are now valued at 100k

    So.... i start taking 1k out of my account monthly to live on.

    Do i have to pay taxes on the 1k? Is it considered profit?

    Or... is it only considered profit anything OVER 50k that i sell?/ take out.
     
  2. B Russ

    B Russ Well-Known Member

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    Im not the most qualified to answer, but im guessing if u are asking, yes. Pretty steep taxes. If you are investing in an individual account, u will pay cap gains when u sell the stock. If some sort of IRA, taxes change based on type of IRA and your age.
     
  3. Picklepie

    Picklepie New Member

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    But if you only withdrawal 1k... how are you taking profits? See what i mean?

    You invested 50k. So ur still eating into ur original investment right?
     
  4. WXYZ

    WXYZ Well-Known Member

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    Each time you sell shares to generate the $1000 per month.....you will have some "capital gain" if the shares have gone up in value from when you bought them initially. What you paid for each share initially is your....."basis". Any profit above that "basis" is a "capital gain". For example:

    Your initial shares cost $50,000 lets say you bought at $50 per share. When you sell......since your shares have doubled.....you will get $100 for each share sold. Your "basis in each share (cost to purchase) is $50. The amount over the initial $50........the $50 that each share has increased in value........is "capital gain". So if you sold $1000 worth of stock in a month at $100 per share and the initial cost of each share was $50 per share you would have a capital gain of $500 on those shares that were sold.

    The GOOD NEWS.....capital gains taxes are very low for most people. Often "0"......it depends on your income and if the gain is short term or long term capital gains.

    Here is some info to get you started learning about this subject:

    Capital Gains Tax

    https://www.investopedia.com/terms/c/capital_gains_tax.asp

    Understanding Long-Term vs. Short-Term Capital Gains

    https://www.investopedia.com/articl...gterm-vs-shortterm-capital-gain-tax-rates.asp
     
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  5. Picklepie

    Picklepie New Member

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    Let me make sure I'm reading this wiki right...

    If i file as single making 39k a year I pay ZERO capital gains tax?
     
  6. WXYZ

    WXYZ Well-Known Member

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    That is the current law.....as I understand it......BUT.....that is for "long term capital gains". Assets you have held for a year or more. "Short term gains".....assets held less than a year.... are taxed as regular income at your regular income rate.

    DISCLOSURE: I am NOT an accountant or tax professional. Verify this information with a tax professional BEFORE RELYING ON IT.
     
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  7. Picklepie

    Picklepie New Member

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    This makes me feel alot better. So basically id just pay 12% income tax?
     
  8. WXYZ

    WXYZ Well-Known Member

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    I assume 12% is your regular Income Tax rate? If so, that would ONLY apply to "SHORT TERM" CAPITAL GAINS. Under your theory of taking $1000 per month.....you can designate which specific shares you want to sell. By doing this you can try to ONLY sell shares that have a long term capital gain. Each share ONLY has to be held one year to get the special........in your case perhaps "0"....... long term capital gains tax treatment.

    DISCLOSURE: I am NOT an accountant or tax professional. Verify this information with a tax professional BEFORE RELYING ON IT.
     

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