What about young investors who are dependents.Do we have to worry about taxes on our stock whileour (parents) are filing us as dependents?
Hello, young investor, and welcome.Your age doesn't shield you from responsibility for taxes. If your income from dividends, capital gains, wages, whatever, is high enough, you have to pay taxes. Your income should be documented on 1099 forms you get from your broker, mutual fund company, bank, etc. There's a section in the start of the 1040 instructions about who has to file. It gives income limits.If you're under 14, your parents can include your investment income on their return, so you might not have to file your own return.The fact that you're a dependent will reduce your standard deduction. Too bad. (But it's worth more to your parents. Be sure to thank them for supporting you. At least once a year, OK?)Hey, congratulations on your early start investing.
If I keep my money in stocks and don't touch itand simply reinvest my profits back. Do I stillhave to worry?
Probably not, but it depends on what you mean by "reinvest my profits". Increase in share price, sometimes called paper profit, isn't taxed. If you get dividends, those are taxable income, even if you use them to buy more shares. If you invest in mutual funds, you may get distributions of capital gains, too. These are taxable, even if you reinvest them automatically.
[[What about young investors who are dependents. Do we have to worry about taxes on our stock while our (parents) are filing us as dependents?]]When you say "worry", I'm not sure I know what you really mean.If you are age 14 years or older, neither you nor your parents have to "worry" about the kiddie tax rules.If you are still a dependent, you do not get the benefit of your personal exemption (your parent's get it). And there are also some concerns for unearned income when you are a dependent of another.If you have only unearned income, then the first $700 is not taxable, and the remainder of the taxable income would be taxed at YOUR tax rate. If you have both earned and unearned income, you receive your standard deduction for the both the earned and unearned portion of your income. But then anything over the standard deduction would be taxable at your rates.You can read more about this in IRS Publication 17 at the IRS web site.TMF TaxesRoyWant to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. It'll help you with your 1998 taxes, and it's never to early to start planning for your 1999 taxes. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
[[If I keep my money in stocks and don't touch it and simply reinvest my profits back. Do I still have to worry]]If you SELL your shares for a profit, you'll have taxes to deal with. There are no provisions to avoid or deferr taxes by "reinvesting" the profits. Once you sell for a profit, the tax man cometh...regardless of what you do with the money.TMF TaxesRoy
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