Lux Investing
DRIP question?
I'm a little confused on how taxes work for a DRIP. I've done a lot of online research but it's still a little vague but here's my interpretation so far... I invest in a company for say 10 years. Each year, I report how much money I received in dividends (all of which I have chosen to reinvest), and I pay taxes on that amount. Then I go to sell the shares at the 10 year mark. (Final sale amount) - (initial investment + initial commission + (each dividend times their respective share prices) + final commission to sale the shares) = capital gains that I pay taxes on. Is this correct or did I misinterpret what I've been reading?
Public Comments
- I have had a DRIP for over 10 years, and I leave the tax work to my accountant. LOL My DRIP has done very well, so I have not worried about taxes.
- Yes You never pay tax on the same dollar of profit twice. Therefore, the taxable dividends you received through the years are not taxed again when you sell your stock.
