paying penalties<\/a> to the IRS. And even if you follow all the rules, you might get hit with taxes that you weren’t expecting when it’s time to file. Don’t get left in the dark – get educated so you’ll know how to budget for taxes on stocks.<\/p>\n\n\n\nIn this guide, we’ll help you understand how the capital gains tax might affect you. Keep reading for the information you need!<\/p>\n\n\n\n
What is the Capital Gains Tax?<\/h2>\n\n\n\n
The term “capital gain” refers to how much money you make on a stock. If you sell the stock for more than you bought it for, you have capital gains that you’ll need to pay taxes on.<\/p>\n\n\n\n
Of course, stocks don’t always go up in value before you sell them (although that’s the hope in investing). If you sell your stock for less than you bought it for, you’ll have a capital loss, and you won’t have to pay tax.<\/p>\n\n\n\n
The capital gains tax applies because gains on stocks are a form of income, and you have to pay taxes on your income. However, business income doesn’t count as a type of capital gain. You’ll get taxed differently on any business income that you bring in over the year.<\/p>\n\n\n\n
Who Pays the Capital Gains Tax?<\/h2>\n\n\n\n
It’s a common misconception that taxes on stocks only apply to the rich. However, anyone can end up with capital gains that they’ll need to pay taxes on at the end of the year.<\/p>\n\n\n\n
Anytime you sell stocks, you might have to pay taxes on it. Other assets, as well as stocks, also count as property that you might have to pay taxes on. For example, if you invested in property, capital gains tax might apply to that when you sell it. Almost all kinds of capital gains are supposed to be reported when you do your taxes.<\/p>\n\n\n\n
When Does the Capital Gains Tax Apply?<\/h2>\n\n\n\n
What are some common situations when the capital gains tax applies or changes? Let’s take a look at what to be aware of before tax season arrives.<\/p>\n\n\n