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short-term VS. long-term capital gain tax rate for margin account

Personal Finance & Money Asked on May 17, 2021

I have a margin account for my stock trading.

I know capital gain from stocks held for more than one year is called long-term capital gain while capital gain from stocks held for less than one year is called short-term capital gain.

If I bought a stock at 100 dollars and sold it for 120 dollars two months later. Then, I used my original 100 dollars and the 20 dollars capital gain to buy another stock on the same day.

If I have never withdrawn the money from my brokerage account to my bank account, do I have to pay tax?

My question is that if the capital gain is never withdrawn, do I need to pay income tax?
Or, do I just need to pay income tax when one day I finally withdraw cash from my account?

I am talking about this situation for a US citizen and income tax to IRS.

One Answer

The IRS hears about when you sell a security, not when you move money around between your own accounts. The capital gain is realized when you sell, and that’s when you pay the tax. This is no different for short term gains, where you’ll pay the income tax rate, than for long term gains.

Answered by Kevin Arlin on May 17, 2021

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