When you sell stock, do you pay tax on dividends with each sale? What happens if you sell, then buy back, etc?

Question

When you sell stock (using an on line trading software through Scottrade for instance), do you pay tax on dividends with each sale? What happens if you sell, then buy back, etc?

For instance, if I made $1000 in dividends after selling stock as it increased in value, then waited til it dipped down again and re-bought at a lower price to take advantage of another upswing growth period, then sold again with another dividend profit making say.... another $500. Would I pay tax on both the 1,000 and the 500 at the end of the year? or just the amount of dividend I had at year close?? Please explain. I'm very new at this.

Answer 1

You pay tax on all dividend income at the end of the year, not when you sell it.  I think you're confusing dividends with capital gains.

Answer 2

You pay taxes on dividends in the year you receive them.  You pay tax on the sale of stock in the year you sold it.  You only pay estimated tax if:

   1.      You expect to owe at least $1000 in tax for the year after subtracting your withholding and credits.

   2.      You expect your withholding and credits to be less than the smaller of;

          * 90% of the tax to be shown on your tax return, or

          * 100% of the tax shown on your last year's tax return.

Answer 3

The 1st responder is exactly correct.  What he did not mention is when you pay the taxes.  If you live in the U S,  you have to file an estimated tax 4 times a year--April 15,  June 15, Sept 15, and Jan  15.  The estimate is based on your earnings during that period.  If your estimate does not come close to your owed taxes on April 15, you are subject to a penalty.  I know.  I have paid several in the past.

Answer 4

You said:

"For instance, if I made $1000 in dividends after selling stock as it increased in value, then waited til it dipped down again and re-bought at a lower price to take advantage of another upswing growth period, then sold again with another dividend profit making say.... another $500."

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You are having trouble with the meaning of the terms and that will effect getting good answers.

The money you make " after selling stock as it increased in value" is called a capital gain not a dividend. If held less than a year it is taxed as normal income.

It doesn't matter how many times you repeat the process you pay taxes on all realized profits.

Dividends are different. And if you get those while you hold the stock then those are taxable too.

Answer 5

You pay tax on all dividend income, and you pay taxes on all trading profits.

There are no dividends based on the sale of a stock.

If a stock increases in value, you have un-realized capital gains, if you sell the stock at a higher price than you paid for it, you have realized capital gains.  You pay tax on realized capital gains.

You pay tax on all profits (gains), you can buy the stock as many times as you want, if you make a profit (gain) you have to pay taxes on each an every gain (profit)

Dividends are paid to current shareholders, and when you receive a dividend it is taxable