Paying income tax on profit from stock (purchase, sell, government)

[AAVC]

I purchased some stock several years ago, and now I am thinking of selling. I've heard that if you buy and hold for more than a year, the tax due is 15% of the profit. True or false? also, is that just for the Feds, or state as well? I also heard that this tax law will expire after this year. Anyone able to comment on this?

[lifelongMOgal]

You question is in regard to capital gains taxes, long term vs. short term. The long term capital gains tax rate is currently at 15%, that is correct. IIRC, it was extended by Obama and Congress in January. As to how long it will actually stay in place is up to Congress.

You can do a search on the IRS website as to capital gains taxation rates for the federal level and you should be able to research your own state government Department of Revenue's website for your state tax rates.

[MrRational]

one point: until you sell you won't actually have the gain.

[truckingbronco]

Originally Posted by AAVC

I purchased some stock several years ago, and now I am thinking of selling. I've heard that if you buy and hold for more than a year, the tax due is 15% of the profit. True or false? also, is that just for the Feds, or state as well? I also heard that this tax law will expire after this year. Anyone able to comment on this?

It's 15% for most people but goes down to 0% if you fall into the bottom income brackets. You can also net any long term capital losses against your gain. Your guess is as good as mine as to what the rates will look like in future years.

Each state is different so definitely do your research. I've seen some that have their own capital gains tax structure and others who just treat it as ordinary income.