Basic Investment Help Please

[10can]

I just have a question on investments and tax.

If I buy a stock or mutual fund in 2007 and sell it for a profit how am I taxed?

Let's say I buy 50 shares of Home Depot stock at $26.00 = $1300

I later sell 50 shares at $28.00 = $1400

I made $100. in profit (minus the brokerage fees it would be $80.)

What % am I taxed at for this $100. capital gain?

Do I get taxed on the capital gain then taxed again on my income?

Thank you

[disneysteve]

It depends how long you hold it and what tax bracket you are in. I believe you have to hold the investment for 1 year for it to qualify for long term capital gains rate.

Capital Gains Tax Rate Calculator
Here is a calculator to run the numbers based on your specific situation.

And here is the general info:
Capital gains tax rates - Tax Q and A

[kv968]

And here is the general info:
Capital gains tax rates - Tax Q and A

A good article, but since it's from 2000, some of the tax figures are out of date. Particularily the long term captial gains tax which is maxed at 15% not 20%. Although with a new regime entering Washington that figure could go right back up there if not higher

[disneysteve]

A good article, but since it's from 2000, some of the tax figures are out of date. Particularily the long term captial gains tax which is maxed at 15% not 20%.

Oops. Thanks for pointing that out. I didn't check the date of the article. My mistake.

[kv968]

Oops. Thanks for pointing that out. I didn't check the date of the article. My mistake.

No problem. Like I said, those rates will probably be going back up come up 2010.

[jIM_Ohio]

you get taxed on the $100 gain only. whether it's long term or short term gains depend on how long you held it. The rates for each vary depending on other income.

short term cap gains are taxed as ordinary income
long term cap gains have a lower rate than ordinary income

at present time- it was not always like this, it's possible when the Bush tax cuts are repealled this changes.

[rizzmo]

Small point, but it is my understanding that you are only taxed on the $80 you actually made. If it is held less than 1 year you will pay short term capital gains tax (your federal tax rate + your state tax rate). If held 1 year or longer you will pay long term capital gains tax (this varies, but is always better than being taxed on short term).