Can I Be Taxed For Trading Stocks And Other Securities?

Investing in your future or planning for retirement by purchasing stocks and other securities is a common strategy. It is also common that you might need to trade these stocks arises before you are ready, and it is important to know the tax implications of undertaking these activities. The key lies in understanding some basic terminology about trading securities, and how these trades impact your bottom line at tax time. This includes knowing the difference between a capital gain, and a loss. You also need to know how the IRS will classify you and your activity, which means a determination as to your status as an investor vs. a trader must be made. An investor buys and sells stock for their personal benefit, while a trader works in the business and the act of buying and selling is actually their job.


The IRS treats these people differently, and for investors, here is what you need to know:


  • When you buy a security for $5,000.00 and sell for $10,000.00 your capital gain is $5,000.00. The amount you made is generally taxable, but if you also had losses in your portfolio you can typically even out the gain with the loss.
  • In certain circumstances you are able to carry over losses from one year to the next. This is beneficial because it can help you to plan for the upcoming year and develop an effective investing strategy.


In order to avoid complicated questions when filing your taxes, it is best to keep a record of all of your securities transactions throughout the year. The more organized you are, the easier it will be for a tax professional to calculate what is taxable versus what you can count as a loss. You should also take advantage of the tax benefits associated with investments for retirement by contributing the maximum allowed to a tax deferred account, such as a Roth IRA. Putting money aside for retirement while receiving a tax break can help to minimize your tax liability, while still allowing you to participate in investment opportunities. For more information on how to handle taxation of securities, call our office.


Let the professionals at Nielsen Law Group help you with all your tax needs. Call (480) 888-7111 or submit a web request here. Our team of experienced legal tax professionals is here to help you with your tax related matters.