Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
If I buy 10 shares of stock at $10 each I have spent $100 in stocks.
If I later sell these within the same year, do I pay taxes only on the difference of the buy price and the sell price [with a deduction for loss] or the entire amount?
If I buy $100 worth of stock, and then sell it later in the year at $110, do I pay capital gains of 15% on $10? Or do I pay 15% on the $110? (I make under $100k a year)
You normally only pay taxes on the difference between the sale price and the cost basis of the asset. In your example, you would probably pay taxes on the $10 difference, not the full sale price of $110. If you paid a commission, however, you would be taxed on your gain minus the commission you paid. Since you held the asset for less than a year, you wouldn't pay the long-term capital gains rate of 20%; you'd be taxed on the capital gain as if it were ordinary income, which depends on your federal income tax bracket.
Also, littleadv makes a good point about the implications of buying the asset with after-tax funds too, so that's another part of the equation to consider as well.
Assuming you bought the stocks with after-tax money, you only pay tax on the difference. Had you bought he shares in a pretax retirement account, such as an IRA or 401(k), the taxation waits until you withdraw, at which point, it's all taxed as ordinary income.
