Do I pay taxes when I profit from a stock sale?

  @Money November 13, 2013: 4:44 PM ET
capital gains

Your gains are taxable, either as ordinary income or capital gains, depending on how long you've held the stock.

NEW YORK (Money Magazine)

Say I buy $100 worth of stock. If the price jumps to $125 and I sell $100 worth, do I pay taxes? -- David, Middletown, Conn.

Yes, your gain is taxable, says CPA Michael Goodman of Wealthstream Advisors in New York City.

Assuming the shares are in a taxable account, your tax bill will be based on the profit you made on each share you sell.

Say, for example, that you purchased 10 shares at $10 each for $100. If the stock price rises to $12.50, and you then sell $100 worth of your stock, you're actually selling eight shares that you originally bought for a total of $80. Thus, you'll owe taxes on a $20 gain.

Related: How to pick stocks for your portfolio

If you've held those shares for one year or less, that gain will be taxed as ordinary income. Shares held for longer are subject to lower capital gains rates, typically 15%. To top of page

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