How to Calculate Taxes on Stocks alone - Clarification?

Question

I know I asked a similar question about this a week ago. I just wanted to get some clarification on it after doing some research. If you haven't seen my previous question, basically I was just asking if there was a way to find out what tax percentage is charged on short-term sales, long-term sales, and dividends individually.

So, the way I understand it is:
-Short-term sales are taxed at the same tax rate as your total income based on the income bracket that you fall in for that year. Essentially, it will vary each year just like all your other income.
-Long-term sales are taxed at a flat rate each year. The rate may vary from year to year, but it will be constant for a given year regardless of your income. Say 15%.
-Dividends are taxed the same way as Long-term sales assuming they’re qualified dividends.

Of course, this is assuming all stocks involved are regular common stocks with qualified dividends. Nothing fancy, just the basic.

I just want to know if the above is correct or if I am misunderstanding anything. I know taxes are a lot more complex than they really need to be. I simply want to double check to see if I at least got the general idea down.

Answer 1

your long term cap gains are taxed at 15%(unless you make the upper limit as per the latest law change)

and this part of your tax return is taxed at that rate

the rest of your income including the short term will be taxed at the rate the amount of that income imposes, could be anything from 10% on up

Answer 2

If you spend $40 for turbo tax or one of those tax preparation software programs, they will do all the computations for you. All you have to do is enter (or download) the dividend info from your 1099 and the sale transactions directly from your brokerage to the software. It's really worth the cost of the software to let them calculate it for you. I think your conclusions above are generally correct, but I believe that some low income people actually pay a zero rate on qualified dividends and possibly LT capital gains. See link below.

Answer 3

Get IRS form 1040, the 1040-ES and publication 505. Remember that if you are a US person, you reduce the income by the amount of your standard deduction and personal exemption.



For a single person who is a US person, the magic numbers for 2014 are



10% bracket $0 to $9075

15% braket $9075 to $36900.



Let's say you have $35000 of wages, $5000 of short term gain and $10000 of long term income.

$35000 + $5000 + 10000 = $50,000.

Taxable =50,000 - 6200 - 3950 = $39850, of which $10,000 is long term income.



Tax will be $9075 at 10%= $907.50

plus $20,775 at 15% = $3116.25

plus $7050 at 0% ltcg rate = $0 because the income hadn't yet crossed $36900.

plus $2950 at 15% ltcg rate = $442.50 because the last little bid did past $36900

Total is $4466.25

Answer 4

1040 tax form along with IRS form 8949 and the schedule D of your 1040 FIT return and then the worksheet that is in the instruction book for your use to determine the qualified dividend and the LTCG gain tax rates for that past tax year at that time in your life.

Hope that you find the above enclosed information useful. 08/30/2014

Answer 5

Perfect! That's exactly what I wanted to hear. Now I fully understand it. Thanks for your help on both questions.