Author Topic: Trading Individual Equities  (Read 1771 times)

OneCoolCat

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Trading Individual Equities
« on: August 14, 2016, 10:00:59 AM »
I've been using the RobinHood App to buy and sell individual stock.  I only use it for play money which is about $35 a week.  I recently sold my first stock, APPL, for a net of 16% inclusive of dividends.  Since I only held the stock for like 3 months, I will have to pay taxes on the dividends and the amount over my basis at my highest tax bracket, right?  Is this going to complicate my taxes?  Does anyone else do this for fun?

jjandjab

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Re: Trading Individual Equities
« Reply #1 on: August 14, 2016, 10:17:44 AM »
Since going to a simple 3 index fund portfolio, I do use a little bit of "play money", but only in my IRA or 401k, as there is no tax assessed on selling stocks or reaping dividends. Of course, if I lose money, I don't get that tax benefit either.

And yes, if you do this multiple times over the course of the year in a taxable account, your taxes will be more complicated. Stocks held less than one year are taxed at your regular income rate (10-39%). The dividends are taxed under a different system (0-20%), so you have to report them separately. Some stocks have non-qualified dividends (REITs) that are taxed as income as well.

OneCoolCat

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Re: Trading Individual Equities
« Reply #2 on: August 14, 2016, 11:31:26 AM »
Do I need to keep track of dividends or taxable income or will Robinhood send me something like a 1099-MISC at years end?

seattlecyclone

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Re: Trading Individual Equities
« Reply #3 on: August 14, 2016, 01:08:09 PM »
They'll send you a 1099-B to report the capital gains and a 1099-DIV to report the dividends. It's pretty simple to put this info on your 1040 as long as Robinhood has all their numbers right.

OneCoolCat

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Re: Trading Individual Equities
« Reply #4 on: August 14, 2016, 01:18:29 PM »
They'll send you a 1099-B to report the capital gains and a 1099-DIV to report the dividends. It's pretty simple to put this info on your 1040 as long as Robinhood has all their numbers right.

Awesome!

Does anyone do short-term trading on the side?  I don't think its considered day-trading because I will hold onto shares for months but it could fall under that classification.  I'm having fun looking for value stocks that I think will bounce back.  I recently bought 15 shares of Sunpower after the stock dropped 30% in one day.  I'll probably hold onto that one for 18+ months.

Paul der Krake

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Re: Trading Individual Equities
« Reply #5 on: August 14, 2016, 01:25:38 PM »
It doesn't matter whether you held the stock 10 minutes or 364 days, capital gains on equities held less than one year will be assessed at the rather punitive short-term rate.

Dividends are more complicated as there are a bunch of dates to be taken into account.

Bottom line: your broker is required by law to keep all this information on file. During tax season you will get the forms seattlecyclone mentioned.

Retire-Canada

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Re: Trading Individual Equities
« Reply #6 on: August 14, 2016, 05:11:00 PM »
Does anyone do short-term trading on the side?

No I invest all my spare money in my long-term index funds. I've never really been interested in gambling.