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Hoots : Do I need to pay tax of my stock earning in the US if my income is low? Assume I do not have income and I have 1 million dollars worth of stock. 99.9% earned from market. Do I need pay tax if I sell 00 per month at USA? - freshhoot.com

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Do I need to pay tax of my stock earning in the US if my income is low?
Assume I do not have income and I have 1 million dollars worth of stock. 99.9% earned from market.

Do I need pay tax if I sell 00 per month at USA?


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The short answer: if you only have long-term capital gains and dividends and no other income, and you're selling only ,000 per month, then you should owe no federal income taxes on it. You could owe state income taxes on it, though, depending on the state.

Federal

Federal tax law has an interesting feature. In 2017, if your taxable income was below ,950 (single) or ,900 (married), then your dividends and capital gains were taxed at 0%. The relevant place to look is on line 8 of the "Qualified Dividends and Capital Gain Tax Worksheet", which is on page 44 of the 2017 1040 instructions.

Note that you can make less than ,900 in dividends and they will still be taxed if you have high enough ordinary income. So if you are married and have a salary of ,900 and you have just of dividend income, that will be taxed.

Also note that since you would have also had deductions and exemptions, a married couple could have made much more than ,900 in dividends and still kept their taxable income below the threshold.

Finally, note that there was a large overhaul to the tax code which takes effect in 2018. Of course I don't have the 2018 1040 yet, but this feature should not have changed in its essence, though the numbers have changed. According to this web site, the new thresholds are ,600 (single) and ,200 (married).

State

Every state is different. Some states have no income tax at all, and according to the Tax Foundation, most states tax dividends as ordinary income. So you likely will pay state income tax on your investment income.

Of course, as I'm not a tax professional or anything, please sprinkle "it's my understanding that..." across all the appropriate places above.


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