When are investments taxed?
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. "An investment is sold when you sell that particular stock or fund. It doesn't wait until you withdraw cash from the brokerage account. Whether an investment is subject to long term or short term taxes depends on how long you held that particular stock. Sorry, you can't get around the higher short term tax by leaving the money in a brokerage account or re-investing in something else. If you are invested in a mutual fund, whether it's long or short term depends on when you buy and sell the fund. The fact that the fund managers are buying and selling behind your back doesn't affect this. (I don't know what taxes they have to pay, maybe you really are paying for it in the form of management fees or lower returns, but you don't explicitly pay the tax on these ""inner"" transactions.) Your broker should send you a tax statement every year giving the numbers that you need to fill in to the various boxes of your income tax form. You don't have to figure it out. Of course it helps to know the rules. If you've held a stock for 11 1/2 months and are planning to sell, you might want to consider waiting a couple of weeks so it becomes a long term capital gain rather than short term and thus subject to lower tax." "This answer is about the USA. Each time you sell a security (a stock or a bond) or some other asset, you are expected to pay tax on the net gain. It doesn't matter whether you use a broker or mutual fund to make the sale. You still owe the tax. Net capital gain is defined this way: Gross sale prices less (broker fees for selling + cost of buying the asset) The cost of buying the asset is called the ""basis price.""  You, or your broker, needs to keep track of the basis price for each share. This is easy when you're just getting started investing. It stays easy if you're careful about your record keeping.  You owe the capital gains tax whenever you sell an asset, whether or not you reinvest the proceeds in something else. If your capital gains are modest, you can pay all the taxes at the end of the year. If they are larger -- for example if they exceed your wage earnings -- you should pay quarterly estimated tax. The tax authorities ding you for a penalty if you wait to pay five- or six-figure tax bills without paying quarterly estimates.  You pay NET capital gains tax. If one asset loses money and another makes money, you pay on your gains minus your losses. If you have more losses than gains in a particular year, you can carry forward up to $3,000 (I think). You can't carry forward tens of thousands in capital losses.  Long term and short term gains are treated separately. IRS Schedule B has places to plug in all those numbers, and the tax programs (Turbo etc) do too. Dividend payments are also taxable when they are paid. Those aren't capital gains. They go on Schedule D along with interest payments. The same is true for a mutual fund. If the fund has Ford shares in it, and Ford pays $0.70 per share in March, that's a dividend payment. If the fund managers decide to sell Ford and buy Tesla in June,  the selling of Ford shares will be a cap-gains taxable event for you.  The good news: the mutual fund managers send you a statement sometime in February or March of each year telling what you should put on your tax forms.  This is great. They add it all up for you. They give you a nice consolidated tax statement covering everything: dividends, their buying and selling activity on your behalf, and any selling they did when you withdrew money from the fund for any purpose.   Some investment accounts like 401(k) accounts are tax free. You don't pay any tax on those accounts -- capital gains, dividends, interest -- until you withdraw the money to live on after you retire. Then that money is taxed as if it were wage income. If you want an easy and fairly reliable way to invest, and don't want to do a lot of tax-form scrambling, choose a couple of different mutual funds, put money into them, and leave it there. They'll send you consolidated tax statements once a year. Download them into your tax program and you're done. You mentioned ""riding out bad times in cash.""  No, no, NOT a good idea. That investment strategy almost guarantees you will sell when the market is going down and buy when it's going up. That's ""sell low, buy high."" It's a loser. Not even Warren Buffett can call the top of the market and the bottom.  Ned Johnson (Fidelity's founder) DEFINITELY can't."
"You can hold a wide variety of investments in your TFSA account, including stocks such as SLF. But if the stocks are being purchased via a company stock purchase plan, they are typically deposited in a regular margin account with a brokerage firm (a few companies may issue physical stock certificates but that is very rare these days). That account would not be a TFSA but you can perform what's called an ""in-kind"" transfer to move them into a TFSA that you open with either the same brokerage firm, or a different one. There will be a fee for the transfer - check with the brokerage that currently holds the stock to find out how costly that will be. Assuming the stock gained in value while you held it outside the TFSA, this transfer will result in capital gains tax that you'll have to pay when you file your taxes for the year in which the transfer occurs. The tax would be calculated by taking the value at time of transfer, minus the purchase price (or the market value at time of purchase, if your plan allowed you to buy it at a discounted price; the discounted amount will be automatically taxed by your employer). 50% of the capital gain is added to your annual income when calculating taxes owed.  Normally when you sell a stock that has lost value, you can actually get a ""capital loss"" deduction that is used to offset gains that you made in other stocks, or redeemed against capital gains tax paid in previous years, or carried forward to apply against gains in future years. However, if the stock decreased in value and you transfer it, you are not eligible to claim a capital loss. I'm not sure why you said ""TFSA for a family member"", as you cannot directly contribute to someone else's TFSA account. You can give them a gift of money or stocks, which they can deposit in their TFSA account, but that involves that extra step of gifting, and the money/stocks become their property to do with as they please. Now that I've (hopefully) answered all your questions, let me offer you some advice, as someone who also participates in an employee stock purchase plan. Holding stock in the company that you work for is a bad idea. The reason is simple: if something terrible happens to the company, their stock will plummet and at the same time they may be forced to lay off many employees. So just at the time when you lose your job and might want to sell your stock, suddenly the value of your stocks has gone way down! So you really should sell your company shares at least once a year, and then use that money to invest in your TFSA account. You also don't want to put all your eggs in one basket - you should be spreading your investment among many companies, or better yet, buy index mutual funds or ETFs which hold all the companies in a certain index. There's lots of good info about index investing available at Canadian Couch Potato. The types of investments recommended there are all possible to purchase inside a TFSA account, to shelter the growth from being taxed. EDIT: Here is an article from MoneySense that talks about transferring stocks into a TFSA. It also mentions the importance of having a diversified portfolio!" If you have the cash on hand to pay the tax on the amount you are transferring I recommend moving to a Roth IRA An IRA is tax-deferred. You put in pretax contributions in to an IRA, and you are taxed on that money (your contributions and interest earned) when you withdraw it at retirement, age 59 1/2.  The idea being that you will be taking less out per year in your retirement years, putting you into a lower tax bracket. The major problem is most people draw out as much or more a year in their retirement years than when they were working. A Roth IRA grows tax free You put after tax contributions into a Roth IRA, you have paid taxes on the contributions, and you are never taxed on the growth. When you draw the money out at retirement you don't pay any income taxes on that money. Let me give you an example: For this example we will use the following information for both scenario: We will invest $400 per month for a total of $4800. The current maximum is $5000 if you are under 50 years old $400 dollars after taxes is $300 Invest $300 a month, at age 65 you have 3,529,432 You owe no taxes on this money, it doesn't matter how much you take out a year. $400 dollars a month is taken pretax out of your paycheck. Invest $400 per month, at age 65 you have $4,705,909 You owe taxes of 25% as you draw that out for at total tax of 1,176,477 4,705,909 - 1,176,477 = 3,529,432 cash in your pocket The problem is if you draw out more than $82,400 (current 2010 filing single) per year you will be pushed to a higher tax bracket and take more of your money away. If you decide to buy a vacation home and you take out $250,000 to pay for it, that's counted as income for that year any you will be in the 33% tax bracket. Even if you can keep yourself to a low income the government forces your hand and makes you draw out more money at age 70, based on their tables, forcing you into a higher tax bracket There are 3 options (option 2 may not be available to you) When you invest 18,000 in a Traditional 401k, you don't pay taxes on the 18k the year you invest, but you pay taxes as you withdraw.  There's a Required Minimum Distribution required after age 70.  If your income is low enough, you won't pay taxes on your withdrawals.  Otherwise, you pay as if it is income.  However, you don't pay payroll tax (Social Security / Medicare) on the withdrawals.  You pay no tax until you withdraw. When you invest 18,000 in a Roth 401k, you pay income tax on the 18,000 in the year it's invested, but you pay nothing after that. When you invest 18,000 in a taxable investment account, you pay income tax on that 18,000 in the year it's invested, you pay tax on dividends (even if they're re-invested), and then you pay capital gains tax when you withdraw. But remember, tax rules and tax rates are only good so long as Congress doesn't change the applicable laws. First, check out some of the answers on this question: Oversimplify it for me: the correct order of investing When you have determined that you are ready to invest for retirement, there are two things you need to consider: the investment and the account.  These are separate items. The investment is what makes your money grow. The type of account provides tax advantages (and restrictions).  Generally, these can be considered separately; for the most part, you can do any type of investment in any account. Briefly, here is an overview of some of the main options: In your situation, the Roth IRA is what I would recommend. This grows tax free, and if you need the funds for some reason, you can get out what you put in without penalty. You can invest up to $5500 in your Roth IRA each year. In addition to the above reasons, which are true for anybody, a Roth IRA would be especially beneficial for you for three reasons: For someone that is closer in age to retirement and in a higher tax bracket now, a Roth IRA is less attractive than it is for you. Inside your Roth IRA, there are lots of choices. You can invest in stocks, bonds, mutual funds (which are simply collections of stocks and bonds), bank accounts, precious metals, and many other things. Discussing all of these investments in one answer is too broad, but my recommendation is this: If you are investing for retirement, you should be investing in the stock market. However, picking individual stocks is too risky; you need to be diversified in a lot of stocks. Stock mutual funds are a great way to invest in the stock market.  There are lots of different types of stock mutual funds with different strategies and expenses associated with them. Managed funds actively buy and sell different stocks inside them, but have high expenses to pay the managers. Index funds buy and hold a list of stocks, and have very low expenses. The conventional wisdom is that, in general, index funds perform better than managed funds when you take the expenses into account.  I hope this overview and these recommendations were helpful. If you have any specific questions about any of these types of accounts or investments, feel free to ask another question. Conversion of after-tax 401K into a Roth is known (on Bogleheads for instance) as a Mega Backdoor Roth IRA.  Recent tax rulings seem to allow for this kind of transfer more cleanly. After conversions, the money is treated as a normal Roth - you don't pay any taxes or penalties on contributions.  For investment earnings, the Roth IRA has the standard five-year rule: most commonly - you must hold the account for five years and be 59.5  years old (there are other criteria). Otherwise, you may pay taxes plus a 10% penalty on the earnings portion of your distribution.  There are other reasons you can withdraw early - spelled out in IRS Publication 590B Figure 2-1. ESPP tax treatment is complicated.  If you received a discount on the purchase of your stock, that discount is taxable as ordinary income when you sell the stock.  Any profit about the market value when the stock was purchased is taxed based upon the holding period of the stock. If you have held the stock less than a year, the profit is taxed at your marginal tax rate (ie taxed as ordinary income). If the stock is held for more than a year, it is taxed at a special capital gains tax rate, which ranges from 0-20% depending on your marginal tax rate (most people pay 15%). "The examples you provide in the question are completely irrelevant. It doesn't matter where the brokerage is or where is the company you own stocks in. For a fairly standard case of an non-resident alien international student living full time in the US - your capital gains are US sourced. Let me quote the following text a couple of paragraphs down the line you quoted on the same page: Gain or loss from the sale or exchange of personal property generally   has its source in the United States if the alien has a tax home in the   United States. The key factor in determining if an individual is a   U.S. resident for purposes of the sourcing of capital gains is whether   the alien's ""tax home"" has shifted to the United States. If an alien   does not have a tax home in the United States, then the alien’s U.S.   source capital gains would be treated as foreign-source and thus   nontaxable. In general, under the ""tax home"" rules, a person who is away (or who   intends to be away) from his tax home for longer than 1 year has   shifted tax homes to his new location upon his arrival in that new   location. See Chapter 1 of Publication 463, Travel, Entertainment,   Gift, and Car Expenses I'll assume you've read this and just want an explanation on what it means. What it means is that if you move to the US for a significant period of time (expected length of 1 year or more), your tax home is assumed to have shifted to the US and the capital gains are sourced to the US from the start of your move. For example: you are a foreign diplomat, and your 4-year assignment started in May. Year-end - you're not US tax resident (diplomats exempt), but you've stayed in the US for more than 183 days, and since your assignment is longer than 1 year - your tax home is now in the US. You'll pay the 30% flat tax. Another example: You're a foreign airline pilot, coming to the US every other day flying the airline aircraft. You end up staying in the US 184 days, but your tax home hasn't shifted, nor you're a US tax resident - you don't pay the flat tax. Keep in mind, that tax treaties may alter the situation since in many cases they also cover the capital gains situation for non-residents." But investing into your own company is already a tax deductible event. Expenditures like Research &amp; Development, employee compensation, and acquiring new equipment are all things that reduce taxable income.  https://www.usatoday.com/story/money/markets/2016/05/20/third-cash-owned-5-us-companies/84640704/  &gt; Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service.  That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors.  1/3 of all dollars created by the US Federal Reserve banking system (physically minted or otherwise) is collectively held by 5 companies. Companies exist to accumulate wealth and will seek to avoid unnecessary expenditures, which includes taxes.  The corporate income tax rate is 35%. For individuals, the top income tax bracket (for every dollar of income above $400,000) is 39.6%.  I argue that dropping the top individual income tax bracket down to 34% will not materially affect these companies (paying 35% income tax) from continuing to just sit on a ludicrous sum of wealth.