Hello,
Question on tax, if I purchase shares for $500 and decide I want out and then sell it for $500 (breaking even) do I need to pay tax?
Hi and welcome to the forum, hope to see you around more often. To your question, the answer is no. There was no gain or loss in your example but did you factor in brokerage?
Lets say you bought your $500 parcel and the broker charged you $20 to buy it. Then you decided to sell your $500 parcel, that will cost you say $20 to sell as well. It will end up looking like this:
Buy $500 + Brokerage $20 = $520
Sell $500 - $20 for brokerage = $480.
In this case you would have made a $40 loss. Always factor in brokerage costs.
Also if I buy shares for $500 and my portfolio goes up to $1000 and I decide to sell half to free carry do I pay tax on that even though im selling for only my purchase price...
Yes, you will pay capital gains on half of the original outlay.
Lets say you bought 100 shares in a company and you decided to sell half when they doubled. You will then need to work out the buying cost including brokerage for 50 of the shares you originally bought. Then you need to work out net proceeds after brokerage of the sale of those 50 shares. Work out the difference of that to come to your capital gain.
Then you need to know if you have held them for 12 Months or more. If you have held them for less than 12 Months then you will pay tax at your your marginal rate for the full gain. If you have held them for more than 12 Months then you get a 50% discount on the capital gain, in other words you only pay half as much tax.
I am not a tax professional, so seek professional advice before doing anything, all the best and good luck.