Does “income” include capital gains?
"For example, if I have an income of $100,000 from my job and I also   realize a $350,000 in long-term capital gains from a stock sale, will   I pay 20% on the $350K or 15%? You'll pay 20% assuming filing single and no major offsets to taxable income. Capital gains count towards your income for determining tax bracket. They're on line 13 of the 1040 which is in the ""income"" section and aren't adjusted out/excluded from your taxable income, but since they are taxed at a different rate make sure to follow the instructions for line 44 when calculating your tax due." "The $100,000 is taxed separately as ""ordinary income"". The $350,000 is taxed at long-term capital gains of 15%. Capital gains is not taxed at 20% until $415,050. Even though $100,000 + 350,000 = $450,000, only $350,000 can be taxed at capital gains. The total ordinary income tax burden will be $31,986 if single, in California. Caveat: By creating a holdings corporation (C-corp), you can section 351 that $100,000 into the C-corp for tax deferment, which won't be taxed until you take money from the corporation. Since you will hold 100% of the voting stock, all distributions will be considered pro rata. Additionally, you can issue yourself a dividend under the rules of 26 USC §§243-246 (a greather-than-80% shareholder who receives a dividend can write-off 100% of said dividend). As long as that dividend doesn't trigger §§1.243-246 of The Regulations by keeping the distribution just under 10% of E&P i.e. $10,000. Wages are deductible against basis so pay yourself $35,000 and keep $55,000 in the corporation and you can decrease the total liabilities down to $22,000 from $31,000, which includes the CA franchise tax. You don't have to pay yourself any money out a corporation to use the money."
In no ways. Both will be reported to the members on their K1 in the respective categories (or if it is a single member LLC - directly to the individual tax return). The capital gains will flow to your personal Schedule D, and the business loss to your personal Schedule C. On your individual tax return you can deduct up to 3K of capital losses from any other income. Business loss is included in the income if it is active business, for passive businesses (like rental) there are limitations. Making or losing income (via selling shares) is the taxable event, not moving the income you made to and from an account.  The only exception would be a special account such as an IRA, and then there would be rules specific to that account structure about when you can withdraw money and what the tax consequences are. Yes, at that stage income is income regardless of source. Assuming you're talking about overall profit, not just the individual wins when gambling. It looks like fair-market value when you receive your virtual currency is counted as income. And you're also subject to self-employment tax on that income. Here's an FAQ from the IRS: Q-8: Does a taxpayer who “mines” virtual currency (for example, uses   computer resources to validate Bitcoin transactions and maintain the   public Bitcoin transaction ledger) realize gross income upon receipt   of the virtual currency resulting from those activities? A-8: Yes,   when a taxpayer successfully “mines” virtual currency, the fair market   value of the virtual currency as of the date of receipt is includible   in gross income. See Publication 525, Taxable and Nontaxable Income,   for more information on taxable income.Q-9: Is an individual who   “mines” virtual currency as a trade or business subject to   self-employment tax on the income derived from those activities? A-9:   If a taxpayer’s “mining” of virtual currency constitutes a trade or   business, and the “mining” activity is not undertaken by the taxpayer   as an employee, the net earnings from self-employment (generally,   gross income derived from carrying on a trade or business less   allowable deductions) resulting from those activities constitute   selfemployment income and are subject to the self-employment tax. See   Chapter 10 of Publication 334, Tax Guide for Small Business, for more   information on selfemployment tax and Publication 535, Business   Expenses, for more information on determining whether expenses are   from a business activity carried on to make a profit. You'd of course be able to offset that income with the expense of mining the virtual currency, depreciation of dedicated mining equipment, electricity, not sure what else. Edit: Here's a good resource on filing taxes with Bitcoin: Filling in the 1040 Income from Bitcoins and all crypto-currencies is   declared as either capital gains income or ordinary income, for   example from mining. Income Ordinary income will be declared on either   your 1040 (line 21 - Other Income) for an individual, or within your   Schedule C, if you are self-employed or have sole-proprietor business.   Capital Gains Capital gains income, or losses, are declared on   Schedule D. Since there are no reported 1099 forms from Bitcoin   exchanges, you will need to include your totals with Box C checked for   short-term gains, and with Box F checked for long-term gains. Interesting notes from that article, your first example could actually be trickier than expected if you started mining before there was a Monero to USD exchange. Also, there can also be capital gains implications from using your virtual currency to buy goods, which sounds like a pain to keep track of. Here's an article on it that might help: http://thefinancebuff.com/restricted-stock-units-rsu-sales-and.html One of the tricky things is that you probably have the value of the vested shares and withheld taxes already on your W-2. This confuses everyone including the IRS (they sent me one of those audits-by-mail one year, where the issue was they wanted to double-count stock compensation that was on both 1099-B and W-2; a quick letter explaining this and they were happy). The general idea is that when you first irrevocably own the stock (it vests) then that's income, because you're receiving something of value. So this goes on a W-2 and is taxed as income, not capital gains. Conceptually you've just spent however many dollars in income to buy stock, so that's your basis on the stock. For tax paid, if your employer withheld taxes, it should be included in your W-2. In that case you would not separately list it elsewhere. "If you sell a stock, with no distributions, then your gain is taxable under §1001.  But not all realized gains will be recognized as taxable.  And some gains which are arguably not realized, will be recognized as taxable. The stock is usually a capital asset for investors, who will generate capital gains under §1(h), but dealers, traders, and hedgers will get different treatment.  If you are an investor, and you held the stock for a year or more, then you can get the beneficial capital gain rates (e.g. 20% instead of 39.6%).  If the asset was held short-term, less than a year, then your tax will generally be calculated at the higher ordinary income rates.  There is also the problem of the net investment tax under §1411.  I am eliding many exceptions, qualifications, and permutations of these rules. If you receive a §316 dividend from a stock, then that is §61 income.  Qualified dividends are ordinary income but will generally be taxed at capital gains rates under §1(h)(11).  Distributions in redemption of your stock are usually treated as sales of stock.  Non-dividend distributions (that are not redemptions) will reduce your basis in the stock to zero (no tax due) and past zero will be treated as gain from a sale. If you exchange stock in a tax-free reorganization (i.e. contribute your company stock in exchange for an acquirer's stock), you have what would normally be considered a realized gain on the exchange, but the differential will not be recognized, if done correctly. If you hold your shares and never sell them, but you engage in other dealings (short sales, options, collars, wash sales, etc.) that impact those shares, then you can sometimes be deemed to have recognized gain on shares that were never sold or exchanged. A more fundamental principle of income tax design is that not all realized gains will be recognized.  IRC §1001(c) says that all realized gains are recognized, except as otherwise provided; that ""otherwise"" is substantial and far-ranging." Think about it from a more pragmatic POV -- on what basis would you levy taxes on money that is lost? If your house were robbed, should you have to pay taxes based on the money stolen from you? What if your car breaks down? Income in its simplest form is revenue - cost of goods sold. So if I buy a car for $10,000 and sell it to you for $8,000, I have negative income. Unless your investments are held within a special tax-free account, then every sale transaction is a taxable event, meaning a gain or loss (capital gain/loss or income gain/loss, depending on various circumstances) is calculated at that moment in time. Gains may also accrue on unrealized amounts at year-end, for specific items [in general in the US, gains do not accrue at year-end for most things]. Moving cash that you have received from selling investments, from your brokerage account to your checking account, has no impact from a tax perspective. "If you sell an asset for more than you paid for it, the excess amount realized is called a capital gain and is generally considered a form of income for tax purposes. Generally, one pays income tax on realized capital gains, unless the sale is exempt—such as the sale of one's principal residence. Capital gains tax can also be avoided or deferred by holding assets in a tax-advantaged investment account like a TFSA or RRSP. When taxable, the effective income tax rate on capital gains income is half the normal rate due to the capital gains inclusion rate. Capital gains income is generally not considered to be employment, ""earned"", or ""working"" income. However, individuals who, say, trade stocks frequently and earn a substantial portion of their income that way may have their gains considered employment income and subject to regular income tax instead of the better rate. I suggest you contact Service Canada and ask them about the impact of a one-time sale of personal property that would result in a realized capital gain. While you would owe income tax on the capital gain, it might not have any impact on your disability benefits, because it would not be earned or employment income. You should also check with your private insurer; they may also consider the sale a capital gain and not employment income, however, only they would be able to tell you for sure whether it would have any possible effect on your benefits." Income and Capital are taxed separately in the uk.  You probably can't get dividends paid  gross even in ISA's you pay the basic rate of tax on dividends only higher rate tax payers get tax benefit from dividends. What you could do is invest in splits (Spilt capital investment trusts ) in the share class where all the return comes as capital and use up some of your yearly CGT allowance that way. TL;DR: Income is how much you make, net worth is the value of all your assets: cash, real estate, stocks, etc.  With the case of Buffett: Berkshire Hathaway's - Buffett's company - market capitalisation is ~$460 Billion. Buffett controls 18% of shares. $460B x 18%: ~$80 Billion.  So we can estimate that a large part of his net worth is tied up in BH stock (obviously this isn't perfect either as there are other factors at play here).  BUT this is only on paper. Ie yes he's worth that, but he doesn't really have $80 Billion somewhere in a bank. He gets the money to live from other personal investments and business means. "If it's fully expensed, it has zero basis. Any sale is taxable, 100%. To the ordinary income / cap gain issue raised in comment - It's a cap gain, but I believe, as with real estate, special rates apply. This is where I am out of my area of expertise, and as they say - ""Consult a professional.""" I know that if you make more, you pay more, but do those who have   more, not make more, pay higher income tax? In general, no. In most locales, income tax is based on income, not on wealth. I am retired. I have little income but a fair amount of wealth. I play very little income tax. (But I do pay other kinds of taxes.) Here's a scenario. 2 people of average wealth with similar situations   have the same job with equal pay. After 5 years, their situations   haven't changed and they still earn equal pay, but now one has $40,000   in their account and the other $9,000. Does one now pay higher income   tax because he has more in his account or does he pay the same because   he makes the same? In most locales, you pay income tax on everything that is counted as income. Your salary is income. In some cases, earned interest is income.  But aside from the earned interest from your bank accounts, neither the $40,000 nor the $9,000 is income. Your huge mansion isn't income. Your expensive car isn't income. The huge amount of land you own isn't income. The pricey artwork on your walls isn't income. You don't pay income tax on any of these, but your local may impose other taxes on these (such as property tax, etc.) [Note: consult the tax laws of your specific locale if you want to know details.] For ESPP, the discount that you get is taxed as ordinary income. Capital gains is taxed at the appropriate rate, which is different based on how long you hold it. So, yes, if the stock is going up, "Are these all of the taxes or is there any additional taxes over these? Turn-over tax is not for retail investors. Other taxes are paid by the broker as part of transaction and one need not worry too much about it. Is there any ""Income tax"" to be paid for shares bought/holding shares? No for just buying and holding. However if you buy and sell; there would be a capital gain or loss. In stocks, if you hold a security for less than 1 year and sell it; it is classified as short term capital gain and taxes at special rate of 15%. The loss can be adjusted against any other short term gain. If held for more than year it is long term capital gain. For stock market, the tax is zero, you can't adjust long term losses in stock markets. Will the money received from selling shares fall under ""Taxable money for FY Income tax""? Only the gain [or loss] will be tread as income not the complete sale value. To calculate gain, one need to arrive a purchase price which is price of stock + Brokerage + STT + all other taxes. Similar the sale price will be Sales of stock - Brokerage - STT - all other taxes. The difference is the gain.  Will the ""Dividend/Bonus/Buy-back"" money fall under taxable category? Dividend is tax free to individual as the company has already paid dividend distribution tax. Bonus is tax free event as it does not create any additional value. Buy-Back is treated as sale of shares if you have participated. Will the share-holder pay ""Dividend Distribution Tax""? Paid by the company. What is ""Capital Gains""? Profit or loss of buying and selling a particular security."