Capital Gains includes stock market, investments, and business profits. In the case of stocks and investments – the capital gains tax is based on what you withdraw and not the profit. In the case of businesses, the taxes will have to be paid monthly, and one could just consider it as a line item in their budget. All other capital gains is determine upon receipt.
Let’s look at the stock market. Ka-Tel’s stock is at $20 a share. You wish to sell the share for $30. This is $10 in profit. Immediately before your transaction deposits, you would be charge $2.50 which is 25% of the profit. $2.50 does not sound like much, but consider the fact that people are not just selling one stock. Now if the money was to reinvest into the stock market, then there is just a trade, and no money will be depositing into the account. Therefore – no Capital Gains tax.
Now, there is gambling. Let’s assume that you were to play the lottery, and you won $1,000,000 as a lump sum which you took. Capital Gains for that winning will be $250,000. This will be automatic, and instead of you receiving $1,000,000 – you will receive $750,000. You won’t have to worry about the tax bill though.
An investment fund is to invest in the stock market in order to receive a source of income every month. The monthly winnings for that month will be taken out of your pay. Let’s assume your investment fund is 9%, and you have $100,000 – you will have $750 that would have generated that month. Your taxes will be $187.50 which will bring your net income to $562.50 which will deposit into your bank account.
Last is business taxes. Let’s assume that you have a business that made $1,000,000 this year. You would have a tax bill of $250,000 which will be paid to the treasury department by February 1 therefore giving you a month to draw your funds together. If you made $1 profit, then you would have to pay 25¢. Now you might consider the idea of just paying you a massive annual salary before your taxes comes up. This will be fraud, and you can only pay yourself the amount of money that you would pay another person for doing the same job you are doing. If your role is $50,000 a year, you can’t pay yourself $900,000 for that year. You can pay yourself $50,000.