I just realized i screw up by selling some of my 2020 gambles. I sold them less than 1 year after buying them… which means higher tax. I did not think of it before selling…
The amount of taxes I will pay on the gain depend on the number of days I hold the securities. If hold less than a year it is consider short term trading. More than a year would be consider Long term trading.
Short term taxes are added to my other incomes(like salary) and use the same brackets but Long Term are not part of other income and have lower brackets.
| Bracket Long term | 40 000$ | 400 000$ | |||
| Rate | 0% | 15% | |||
| Bracket Short term | 10 000$ | 40 000$ | 85 000$ | 163 000$ | 207 000$ |
| Rate | 10% | 12% | 22% | 24% | 32% |
It is very important to understand that short term gain are part of all income.
So, if I make 120 000$ income from my job + 10 000$ gain on short term stock I will have to pay tax on 130 000$ income with short term bracket. If these 10 000$ gain were long term I will have to pay tax on 120 000$ income with short term bracket only since 10 000$ gain on long term are tax at a rate of 0%.
Let’s have a look on the trades I made on 2 gambles: Oil with USL and airlines with JETS. I can sum it up in this table
| Ticker | Nb days for tax | gain | Short term tax (22%) | Long term tax (0%) |
|---|---|---|---|---|
| USL | 315 | 520 | 114 | 0 |
| JETS | 217 | 441 | 97 | 0 |
I assume a Long term rate of 0% since i m pretty sure i will not make more than 40k$ on stocks. I also assume a short term rate of 22% due to my other income leading to a bracket around 120k$.
I trig a tax bill of 200$ on a gain of 1000$ just by selling too early 🙁 I have other gamble that i did not sold yet and I will pay more attention to this factor in the future.
