Taxation of capital gains is a big issue among the rich, poor, middle class, investors, and politicians' alike.
The most common capital gains happen when people sell stock that they invested in for a profit.
The question is how much should it be taxed or should it even be taxed at all? There is a debate that goes on with the issue because if you think about it there is a valid argument that dividends and capital gains shouldn't actually be taxed AT ALL (especially dividends).
If a company pays a dividend the company itself has ALREADY paid taxes on the money that they made which would be net income before taxes; why should stockholders pay taxes again for something the company has already paid taxes on previously? Then there is the argument that companies should pay taxes on earnings including the shareholders actual earnings because the shareholders are already looked at has a separate entity from the company itself so anything they make should be taxed as normal.
No matter what stance you take on the taxation of investments it's important to note that most places in the U.
S.
require that you DO pay taxes on capital gains.
There are two types of capital gains that exist long term and short term gains which are taxed at different rates in most places in the U.
S..
As it stands from 2008 long term capital gains may not be taxed AT ALL if your in the lower tax brackets, but laws will appear to change around 2010 which will make them taxed at 15% whilst short term capital gains are taxed now and will continue to be in the future at higher rates than short term capital gains.
The intention of not taxing long term gains so much is that the company has already paid taxes on the money it took to make the stock value go up higher in price so you shouldn't have to pay taxes twice.
I think investors can learn a lesson from this and that is "don't buy a company unless you plan on the company continuing to do well in future".
If you a buy a company with the intention of hanging onto it for a long time then you don't run the risk of being taxed so heavy; besides, Warren Buffet is richer than almost any investor out there and he has said many times that a buy and hold strategy works the best, not just for taxes.
The most common capital gains happen when people sell stock that they invested in for a profit.
The question is how much should it be taxed or should it even be taxed at all? There is a debate that goes on with the issue because if you think about it there is a valid argument that dividends and capital gains shouldn't actually be taxed AT ALL (especially dividends).
If a company pays a dividend the company itself has ALREADY paid taxes on the money that they made which would be net income before taxes; why should stockholders pay taxes again for something the company has already paid taxes on previously? Then there is the argument that companies should pay taxes on earnings including the shareholders actual earnings because the shareholders are already looked at has a separate entity from the company itself so anything they make should be taxed as normal.
No matter what stance you take on the taxation of investments it's important to note that most places in the U.
S.
require that you DO pay taxes on capital gains.
There are two types of capital gains that exist long term and short term gains which are taxed at different rates in most places in the U.
S..
As it stands from 2008 long term capital gains may not be taxed AT ALL if your in the lower tax brackets, but laws will appear to change around 2010 which will make them taxed at 15% whilst short term capital gains are taxed now and will continue to be in the future at higher rates than short term capital gains.
The intention of not taxing long term gains so much is that the company has already paid taxes on the money it took to make the stock value go up higher in price so you shouldn't have to pay taxes twice.
I think investors can learn a lesson from this and that is "don't buy a company unless you plan on the company continuing to do well in future".
If you a buy a company with the intention of hanging onto it for a long time then you don't run the risk of being taxed so heavy; besides, Warren Buffet is richer than almost any investor out there and he has said many times that a buy and hold strategy works the best, not just for taxes.
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