First of all, stocks are a kind of Capital, which is not the object of taxation. Only when you buy the capital gains or losses generated by selling, that is, the part where the selling price exceeds or falls below the cost, do you need to file tax returns.
If you bought stocks in 2017, but only sold them in 2018, you don't need to declare the tax bill in 2017, but wait until you report the tax in 2018. In addition, stock trading will also bring Dividend income. It depends on the year in which you received the dividend. Generally speaking, at the beginning of the year, you will receive the stock trading record of the previous year provided by the brokerage firm, 1099-B. Most brokerage firms will also combine other 1099 forms, such as 1099-DIV including dividend income and 1099-INT including interest income. Next, we will talk about the stock-related tax laws of different tax filing identities. For how to distinguish between Resident Alien (RA) and Non-resident Alien (NRA), please refer to Discrimination of Tax Filing Identity. Contents [hide] 1. U.S. Citizen (and resident alien) US citizen (and resident foreigner defined by tax law) Stock related tax law Capital gains tax rate Dividend tax rate declaration form Net investment Income Tax (NIIT) 2. Non-resident Alien Tax Law Definition Non-resident Alien Stock Related Tax Law Capital Profits Tax Rate Dividend Tax Rate Declaration Form Comments
3. Wash Sale Fake Sale Repurchase Reference Material Capital Profits Tax Rate Dividend Tax Rate Declaration Form Net Investment Income Tax (NIIT) 1. U.S. Citizen (and Resident Alien) The capital gains tax rate of the stock-related tax laws of American citizens (and residents and foreigners defined by tax laws) should first distinguish whether it is long-term asset gains or short-term, and the standard is one year. Holding for more than one year is long-term, otherwise it is short-term. Net long-term capital gains/losses = long-term asset gains–long-term asset losses Net short-term capital gains/losses = short-term asset losses Net capital gains = net long-term capital gains–net short-term capital losses The tax rate of net capital gains is generally 15%. If you are in the tax rate of 10% or 15%, the tax rate of net capital gains is 0. However, if your income exceeds the highest tax rate by 39.6%, the tax rate of net capital gains will become 20%. Net short-term capital gains: they are always regarded as ordinary income, and they are taxed with progressive tax rates together with other incomes.
Note that this is why the previous formula cannot be reversed, because the net long-term capital loss cannot be used to offset the net short-term capital gain. Net capital loss: If your capital loss exceeds your profit, you can only deduct $3,000 of ordinary income at most. The excess can be carried over to the next year for calculation. Dividend tax rate Dividends are divided into two types: Ordinary Dividends and Qualified Dividends. Ordinary dividends are the most common, and they are also taxed with progressive tax rates together with other incomes, in Box 1a of 1099-DIV. Compliance dividends can be taxed according to the tax rate of net capital gains after certain conditions are met, which is in Box 1b of 1099-DIV. The most important condition that everyone should pay attention to is the requirement of holding period, which basically means holding for more than 60 days within 120 days before and after dividend payment. Stock trading in reporting form: report specific stock trading in sales and other dispositions of capital assets in form 8949, and then summarize it in schedule d, capital gains and losses in form 1040. Note that if all stock transactions are based on basis was reported to the IRS, you can skip the 8949 form and fill in Schedule D directly. Dividends: reported directly in Line 9a and 9b of table 1040. If it exceeds $1,500, it should be reported in Schedule B, Interest and National Divisions. The Net Investment Income Tax (NIIT) high-income people (annual joint tax return exceeds 250k, single person exceeds 200k) may also need to pay an additional 3.8% tax.
You can check if you are interested. Non-resident doesn't need to pay this tax (well, it's very make sense, because everyone just came here and didn't have such a high income). 2. Non-resident Alien Tax Law defines non-resident foreigners' stock-related tax laws. For foreigners, such as international students, the tax laws are rather simple and rude, because stock transactions are generally not effectively connected with a U.S. trade or business, so they fall into the category of 30% Tax. However, there are some special regulations. If the capital gains tax rate is less than 183 days in the United States, there is no need to pay taxes. The 183 days here have nothing to do with the 183 days of the substantial presence test, so there is no saying that the first five years of international students are not counted as days. For international students, if they don't have any American income such as scholarships, that is, they don't have to pay capital gains tax even after more than 183 days. In addition, capital loss can't be deducted. The dividend tax rate belongs to the category of Fixed or Determinable Income, and the tax rate is 30% or lower. However, Article 9 (Divisions) of Sino-US treaty does set a tax rate of 10%. unfortunately, there is no mention of a lower tax rate in the capital gains section. Generally speaking, you should receive the 1042-S form and deduct 30%. However, many brokers give the 1099 form according to the American standard. In fact, it doesn't matter, as long as your tax bill is correct. The above mentioned two items should be filled in the Schedule NEC—Tax > comments on the 1040NR form.
It can be seen that if you are a Non-resident Alien (NRA) living in the United States, it is simply not cost-effective to speculate on US stocks: 30% of the profits earned should be handed over to the United States, and the lost money cannot be used to offset taxes, which is really too bad! This treatment is far worse than those who have never set foot in the United States: they can open an account remotely to speculate in US stocks as long as they are on the platform of Infront Securities or Tiger Securities, and their capital gains tax rate is 0! 3. Wash Sale fake sale repurchase has always wanted to talk about this topic, and many people may have simply understood it when they met. There doesn't seem to be an official statement about the Chinese translation of this. I think "fake sale and repurchase" is a good translation, which reflects the reason why the Tax Bureau has set such a special rule: it doesn't want you to sell a large number of stocks before the New Year to generate capital losses for tax deduction, and then buy them back immediately after the new year, pretending that nothing has happened. Therefore, Wash sale means that you buy and sell the same stock within 30 days, resulting in capital loss, and IRS will not allow you to reduce this loss. But in fact, is it really not allowed? To put it more strictly, it is not allowed to reduce this loss now. This loss has not really disappeared, but is included in the basis of your new stock, which you can understand as increasing the cost of your new stock.
When you sell new stocks again, your earnings are actually reduced by the losses that were not allowed before. Therefore, "Disallow" here is actually "Defer". Generally, your brokerage firm has done your homework for you, so you can count your own 1099-B. Example: $1,000 buys 100 x shares. As a result, the market collapsed in the first two weeks, and you ran away at $750, which was a loss of $250. As a result, the stock market stabilized again this week, so you bought another 100 shares of the same stock for $800. Because they are identical stocks, you can't deduct the asset loss of $250. However, the cost of your new stock can be added to that $250 to become $1,050, that is, if it rises to more than $1,050, you will have a profit on assets. Then the question is coming. Is it far from the day when the Dow breaks 30,000?