Q: Regarding stock investments
I have invested about $3500 into Nvidia stock, and at this point, it has garnered me about $350 profit. I haven't sold yet because I have a question regarding it. I know I have to pay capital gains taxes, but after I sell, would I have to pay taxes on the $3500 investment, or only on the $350 profit, or on both? Thanks!
A:
In the realm of stock investments, it's important to understand how taxes on profits work. When you sell stocks, like your Nvidia shares, you're only required to pay taxes on the profit you make, not the total amount you initially invested. In your case, this means you would only owe taxes on the $350 profit, not the entire $3500 investment.
The profit you've made from selling your stock is considered a capital gain. Depending on how long you've held the stock, this can be classified as either short-term or long-term capital gains, which are taxed at different rates. The distinction is crucial because long-term capital gains usually benefit from lower tax rates compared to short-term ones.
Before filing your taxes, it's recommended to gather all relevant documents and possibly consult with a tax advisor to ensure you understand your specific tax obligations and opportunities for deductions or credits. Understanding these details will help you navigate the complexities of capital gains taxes and make informed decisions about your investments.
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