In a scenario where, for example:
An employee exercised a "same-day-buy-and-sell" operation on his employee stock options. He ends up making a profit / gain of $10K. He already has a yearly salary of $55K. Because of this Capital Gain, the employee worries about how much he/she will get taxed and whether or not he will be bumped into a higher tax-bracket.
Just to get some clarity on tax-brackets first:
- Is it true that only 50% of the Capital Gain is subject to taxes? (ex: %50 of $10K = $5K)
- How much of that 50% is actually taxed? Does that depend on your current tax-bracket based on just your salary? Or is it ($Salary + 50% of Capital Gain?) = $Amount used to determine which bracket you stand in?
Now, would transferring the Capital Gain (immediately once received) to a TFSA work in the employee's favor in order to cut down on taxes?
- Is it correct to assume that - since a limit of $5K can be stored in a TFSA, the remaining amount (ex: $10K - $5K in TFSA = $5K remaining) would then be subject to the same calculations the full Capital Gain would have undergo? (so %50 of $5K = $2.5K)
- Does the amount tossed in the TFSA have to stay for a certain period of time (days, weeks, months?) before it can be transferred over a standard bank account and/or used to purchase expensive items?
Overall, would there be better alternatives to reduce your tax payout other than reinvesting into more stocks, or mutual funds? How about education? First-time home buyer / mortgage?
Sorry for the immense question, but this knowledge territory is really blurry for me. Any external resources would be appreciated as well.