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Thank you very much for this video!! I'm pretty new about 2 years now investing and still learning how to. Never even thought about the Tax subject😳 So thank you very much for sharing this info ! Already watched a couple of ur vids and appreciate how simple and straightforward you explain these topics. Great job!
We are all still learning no matter how many years of investing experience :) I'm so happy that I could help you out! Thank you very much for watching!
Thanks a lot for explaining this concept!! I'm in the business of growing my net worth!! Got to keep a close eye on the tax brackets!! Nice plant btw my friend!!
Super clear and helpful! Thank you! Do you think it's better to sell a mutual fund at a loss to offset capital gains or figure out other ways to reduce your taxable income? Although I am not sure if there are too many other ways to reduce taxable income other then maxing retirement contributions?
There are plenty of other ways to reduce your taxable income. I think that it would help you out a lot if you tried watching some of my other videos that are on Tax topics: th-cam.com/play/PLh6FwjE4GHQ_OEvl4481HyAdBOHWciB4G.html It also depends on what your goals are such as if you plan on keeping the mutual fund practically forever, or if you want to invest in something else, plus you can only realize 3k losses per year, etc. I hope some of those other tax videos can help you out!
Are the profits from the sale of real estate considered income (thus putting me up in a higher income tax bracket) or are the income tax brackets calculated seperatly to the income from the sale of the property (in which case I will be on the lowest bracket and will be taxed 0% capital gains)??? Thanks so much! That's the only part I can't find an answer to...🙏💙
It depends on what kind of real estate; investment or personal residence. Generally, it IS considered income that is subject to long-term (>1yr) or short-term (
@@OnCashFlow thanks so much! So LT capital gains on investment property will be taxed at their bracket which is LT gains + income? Seems unfair if someone doesn't make much income but sells a property he suddenly jumps to a higher bracket only for that transaction...
They are considered income, but they are taxed at a different rate based on your "taxable income" from other sources. So if you are Single and make $50,000 a year at your job and no other income. then you would get a standard deduction of $12,550. which would but your taxable income at $37,450. THEN you add your long term capital gains to that taxable income. If you have $2,000 of long term capital gains then it would put your taxable income at $39,450. At the current 2021 long term capital gains rate you would pay 0% on those $2,000 of long term capital gains because your total taxable income ended up being less than $40,000 Single. I hope this helps, Brian!
@@Brian-eh1xj The standard deduction is a universal amount of income that is not subject to federal income taxes based on filing status: Single, Married Filing Joing, or Head of Household. Here is a video I made explaining it: th-cam.com/video/EzuVOTLn42o/w-d-xo.html Hope this helps! :)
So regarding long term stock gains, if the taxable income on my W2 exceeds 40K, does this mean I will pay capital gain taxes? Or is the taxable income used AFTER the standard deduction is applied?
After the Standard deduction because It is based on "taxable income". So Total Income - Adjustments To Income = Adjusted Gross Income - Deductions (standard or itemized + Qualified business income deduction) = taxable income. I hope this helps! :)
Some states choose not to tax any income. The federal government taxes income, but they treat earned income and investment income differently. I hope this helps answer your question!
Hey Zach... . What are your thoughts on Certified Financial Planners? (Not sure if that is the right name for those professionals.) But...have you ever used one? Do you recommend them?
I think they could be helpful for complex financial situations, but I myself don't see myself needing one. I don't think that most everyday people need their advice for anything.
I concur, well over 95% of financial decisions and transactions can be efficiently discharged by a plain old individual consumer, no fees, no commissions. I’m exaggerating in that there are always small transactional fees, often baked in such that you don’t know that you are paying for them (perhaps in a slight lower rate of return or slightly higher rate of loan interest). But certainly anyone can achieve FI without any financial planners or investment advisors.
If a state has no income tax then most likely they won't tax your long term capital gains either. These states currently don't tax your capital gains: Alaska Florida Nevada New Hampshire South Dakota Tennessee Texas Washington Wyoming I recently made a move to Tennessee myself ;)
So just to recap: stocks, options, bonds, forex, crypto currency would all be considered capital gains aka unearned / passive income aka no FICA tax? Only capital gains tax ?
@@OnCashFlow When you say retail investors, does this include trading LLC’s? Would trading LLC’s be exempt from FICA taxes? Or is that dependent on how they trade? For an example trading part time because I have a 9-5 vs trading full time?
@@damacx I can't say for sure to answer your specific questions, but as far as I know (what I think) is that it is difficult to legally get day trader status (whether you have an LLC or not). When I say retail investors, I just mean individuals/not institutional investors (large companies, pension funds, etc.) If you are a day trader then profit shouldn't be subject to FICA because it's not "earned income" but still it is my understanding that not anyone can just get day trader status in the eyes of the IRS. I hope that this can begin to help you :)
You definitely have to be a resident of Florida to realize those gains without NJ taxing you. Depending on each state's laws, you might have to live in FL for at least one year or something similar.
@@OnCashFlow is it possible to have my primary residence in FL and another home in NJ? Im willing on holding longer if it means saving 10-20% on taxes.
You can have homes in two different states yes. Residence is typically where you spend a majority of the year. Could be a good idea for you to do, If it is a lot of money we are talking here then get some paid advice from a professional! It will be worth it many times over!
Hi! Great video. I have a condo I purchased and lived in since 2003. Condo is beautiful loft in North Jersey near NYC, so it's great location. I moved out about 5 yrs ago and rent it out since then. If I sell and have a gain of 160k, and dont live in the condo since I'm renting it, do I get taxed on the gains? Or do I need to move back to my condo and live in it before selling to avoid getting taxed?
Yes you would be taxed at the long term capital gains tax rate in that case. You also will probably have depreciation recapture. You would have to have lived in the Condo for about two years " if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale." www.irs.gov/taxtopics/tc701 Otherwise, another option would be the 1031 exchange if you invest the gains back into more properties. I would definitely get help from a professional if you are making that much in gains. Good luck! I hope this was helpful.
Can you explain this? If I make $1000 from the sale of Tesla stock and lose $1000 from the sale of Nio stock ... do I pay tax on the $1000 gain from Tesla or do the sales wash and the capital gain is $0 therefore no tax.
Correct. You will claim both gains and losses, and yes, the loss would offset the gain. You can only claim up to $3,000 in losses per tax year, any more than that must be carried forward to future years.
It doesn't get added to your W-2, it does get included in total income, but they are taxed at their own special rate, not the marginal rate that your employment income is subject to.
If I buy a stock a year and 1 day ago but through the year I bought more shares (let’s say 6 months later) do I still get capital gains on my original investment?
It depends on what kind of account the stocks are in. If it is in a retirement account (IRA, 401(k) etc. then it doesn't matter, capital gains aren't taxed. If it is in a regular taxable investment account then you won't get taxed on capital gains unless you sell the stock and realize the capital gains. If you were to sell one stock and your brokerage company uses FIFO (First in, First Out) then you would sell that stock that you bought a tear and 1 day ago and then realize a long-term capital gain on it (assuming it increased in value). I hope this makes sense and helps answer your question!
The income for 0% capital gain is that just earned income of does it include the income from the capital gain. Example income < $40k per and a capital gain of $100K is your income for the capital gain rate $40K or $140K?
I believe it should be the total taxable income. So if you have 40k taxable income from working and 100k of long-term capital gains then your total taxable income would be 140k. 100k would be at the long-term capital gains rate. 40k would be at the regular tax brackets.
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Thank you very much for this video!! I'm pretty new about 2 years now investing and still learning how to. Never even thought about the Tax subject😳 So thank you very much for sharing this info ! Already watched a couple of ur vids and appreciate how simple and straightforward you explain these topics. Great job!
We are all still learning no matter how many years of investing experience :) I'm so happy that I could help you out! Thank you very much for watching!
Thanks a lot for explaining this concept!! I'm in the business of growing my net worth!! Got to keep a close eye on the tax brackets!! Nice plant btw my friend!!
I'm so glad that it helped you! Thank you!
Good info. I was totally confused about these and you explained them so well.
I'm so glad it was helpful Shana!
People say flip side, but not See you on the flip side. Its been a long quarantine, no flip side in sight.
lol I still catch myself saying it occasionally. How about "on the bright side"? I'm looking forward to the brighter side!
Excellent video you have a new subscriber
Thank you very much for subscribing! It means a lot, I really appreciate it!
Super clear and helpful! Thank you! Do you think it's better to sell a mutual fund at a loss to offset capital gains or figure out other ways to reduce your taxable income? Although I am not sure if there are too many other ways to reduce taxable income other then maxing retirement contributions?
There are plenty of other ways to reduce your taxable income. I think that it would help you out a lot if you tried watching some of my other videos that are on Tax topics:
th-cam.com/play/PLh6FwjE4GHQ_OEvl4481HyAdBOHWciB4G.html
It also depends on what your goals are such as if you plan on keeping the mutual fund practically forever, or if you want to invest in something else, plus you can only realize 3k losses per year, etc. I hope some of those other tax videos can help you out!
@@OnCashFlow okay awesome! I will def check that out!
I just watched your Above the Line tax deduction video, very insightful! They should be teaching this stuff in school!
@@ngee4925 Thanks for your support!
Are the profits from the sale of real estate considered income (thus putting me up in a higher income tax bracket) or are the income tax brackets calculated seperatly to the income from the sale of the property (in which case I will be on the lowest bracket and will be taxed 0% capital gains)???
Thanks so much! That's the only part I can't find an answer to...🙏💙
It depends on what kind of real estate; investment or personal residence. Generally, it IS considered income that is subject to long-term (>1yr) or short-term (
@@OnCashFlow thanks so much!
So LT capital gains on investment property will be taxed at their bracket which is LT gains + income?
Seems unfair if someone doesn't make much income but sells a property he suddenly jumps to a higher bracket only for that transaction...
Yes! People still say "On the Flip Side!" Sounds way better than "on the other side" (;
Haha! That's good, it was starting to feel like I was getting old with that kind of lingo 😀
So long term capital gains are counted into income when deciding the tax percentage?
They are considered income, but they are taxed at a different rate based on your "taxable income" from other sources. So if you are Single and make $50,000 a year at your job and no other income. then you would get a standard deduction of $12,550. which would but your taxable income at $37,450. THEN you add your long term capital gains to that taxable income. If you have $2,000 of long term capital gains then it would put your taxable income at $39,450. At the current 2021 long term capital gains rate you would pay 0% on those $2,000 of long term capital gains because your total taxable income ended up being less than $40,000 Single.
I hope this helps, Brian!
@@OnCashFlow that’s makes sense, but what do you mean by that standard deduction of $12,550?
@@Brian-eh1xj The standard deduction is a universal amount of income that is not subject to federal income taxes based on filing status: Single, Married Filing Joing, or Head of Household.
Here is a video I made explaining it: th-cam.com/video/EzuVOTLn42o/w-d-xo.html
Hope this helps! :)
So regarding long term stock gains, if the taxable income on my W2 exceeds 40K, does this mean I will pay capital gain taxes? Or is the taxable income used AFTER the standard deduction is applied?
After the Standard deduction because It is based on "taxable income". So Total Income - Adjustments To Income = Adjusted Gross Income - Deductions (standard or itemized + Qualified business income deduction) = taxable income. I hope this helps! :)
So then why are some states 0% on tax for income if this is considered an income ??
Some states choose not to tax any income. The federal government taxes income, but they treat earned income and investment income differently. I hope this helps answer your question!
Hey Zach... . What are your thoughts on Certified Financial Planners? (Not sure if that is the right name for those professionals.) But...have you ever used one? Do you recommend them?
I think they could be helpful for complex financial situations, but I myself don't see myself needing one. I don't think that most everyday people need their advice for anything.
@@OnCashFlow I feel you. Yeh...actually...I have already learned so much just watching YOUR videos...for free.😉
@@neosoul2010 I'm so grateful that I can help you, I truly am!
I concur, well over 95% of financial decisions and transactions can be efficiently discharged by a plain old individual consumer, no fees, no commissions. I’m exaggerating in that there are always small transactional fees, often baked in such that you don’t know that you are paying for them (perhaps in a slight lower rate of return or slightly higher rate of loan interest). But certainly anyone can achieve FI without any financial planners or investment advisors.
What about if you live in a state with no income tax? How are long term capital gains taxed?
If a state has no income tax then most likely they won't tax your long term capital gains either. These states currently don't tax your capital gains:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
I recently made a move to Tennessee myself ;)
So just to recap: stocks, options, bonds, forex, crypto currency would all be considered capital gains aka unearned / passive income aka no FICA tax? Only capital gains tax ?
In most circumstances for retail investors, yes.
@@OnCashFlow When you say retail investors, does this include trading LLC’s? Would trading LLC’s be exempt from FICA taxes? Or is that dependent on how they trade? For an example trading part time because I have a 9-5 vs trading full time?
@@OnCashFlow Thank you for making this video!
@@damacx I can't say for sure to answer your specific questions, but as far as I know (what I think) is that it is difficult to legally get day trader status (whether you have an LLC or not).
When I say retail investors, I just mean individuals/not institutional investors (large companies, pension funds, etc.)
If you are a day trader then profit shouldn't be subject to FICA because it's not "earned income" but still it is my understanding that not anyone can just get day trader status in the eyes of the IRS.
I hope that this can begin to help you :)
@@OnCashFlow Thank you for your responses! They have been very helpful!
Hey if I have a hedgefund that invests in crypto can i sell it in Florida to avoid nj state cap gain tax or will i have to move 🤔
You definitely have to be a resident of Florida to realize those gains without NJ taxing you. Depending on each state's laws, you might have to live in FL for at least one year or something similar.
@@OnCashFlow is it possible to have my primary residence in FL and another home in NJ? Im willing on holding longer if it means saving 10-20% on taxes.
You can have homes in two different states yes. Residence is typically where you spend a majority of the year. Could be a good idea for you to do, If it is a lot of money we are talking here then get some paid advice from a professional! It will be worth it many times over!
Hi! Great video. I have a condo I purchased and lived in since 2003. Condo is beautiful loft in North Jersey near NYC, so it's great location. I moved out about 5 yrs ago and rent it out since then. If I sell and have a gain of 160k, and dont live in the condo since I'm renting it, do I get taxed on the gains?
Or do I need to move back to my condo and live in it before selling to avoid getting taxed?
Yes you would be taxed at the long term capital gains tax rate in that case. You also will probably have depreciation recapture.
You would have to have lived in the Condo for about two years " if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale."
www.irs.gov/taxtopics/tc701
Otherwise, another option would be the 1031 exchange if you invest the gains back into more properties. I would definitely get help from a professional if you are making that much in gains. Good luck! I hope this was helpful.
What happens when the stocks pay dividends. Do I pay taxes on the dividends even if I don’t take the dividends
If you have them in a regular investment account then yes, you have to report the dividends as income. Even if they were automatically reinvested.
Can you explain this? If I make $1000 from the sale of Tesla stock and lose $1000 from the sale of Nio stock ... do I pay tax on the $1000 gain from Tesla or do the sales wash and the capital gain is $0 therefore no tax.
Correct. You will claim both gains and losses, and yes, the loss would offset the gain. You can only claim up to $3,000 in losses per tax year, any more than that must be carried forward to future years.
@@OnCashFlow Thank you! That is a relief
@@Mikekramercomedy No problem! I'm glad that I could be helpful!
My LTCG is added to my W-2 salary and from there is my marginal tax???? Or my LTCG is taxed separated since my income is over $100k filing single.
It doesn't get added to your W-2, it does get included in total income, but they are taxed at their own special rate, not the marginal rate that your employment income is subject to.
If I buy a stock a year and 1 day ago but through the year I bought more shares (let’s say 6 months later) do I still get capital gains on my original investment?
It depends on what kind of account the stocks are in. If it is in a retirement account (IRA, 401(k) etc. then it doesn't matter, capital gains aren't taxed. If it is in a regular taxable investment account then you won't get taxed on capital gains unless you sell the stock and realize the capital gains. If you were to sell one stock and your brokerage company uses FIFO (First in, First Out) then you would sell that stock that you bought a tear and 1 day ago and then realize a long-term capital gain on it (assuming it increased in value). I hope this makes sense and helps answer your question!
Very informative
Thank you very much! I'm so glad that it was helpful!
The income for 0% capital gain is that just earned income of does it include the income from the capital gain. Example income < $40k per and a capital gain of $100K is your income for the capital gain rate $40K or $140K?
I believe it should be the total taxable income. So if you have 40k taxable income from working and 100k of long-term capital gains then your total taxable income would be 140k. 100k would be at the long-term capital gains rate. 40k would be at the regular tax brackets.