Final answer:
When you sell stock, you may be subject to paying taxes on any capital gains you make. The amount of tax you owe on the capital gain depends on how long you held the stock before selling it. If you held the stock for less than a year, the capital gain is taxed at your ordinary income tax rate.
Step-by-step explanation:
When you sell stock, you may be subject to paying taxes on any capital gains you make. A capital gain is the increase in the value of the stock from when you bought it to when you sold it. If you sell the stock at a higher price than what you paid for it, you will have a capital gain. The amount of tax you owe on the capital gain depends on how long you held the stock before selling it.
For stocks held for less than a year, the capital gain is considered short-term and is taxed at your ordinary income tax rate. For stocks held for more than a year, the capital gain is considered long-term and is taxed at a lower rate.
Let's say you bought a stock for $100 and sold it for $150, resulting in a $50 capital gain. If you held the stock for less than a year and your ordinary income tax rate is 25%, you would owe $12.50 in taxes on the capital gain.