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[quote=Anonymous][quote=Anonymous]I would like to know how people pay the capital gains tax instead of their own tax bracket? All of my gains in the stock market somehow get taxed under my own tax bracket even though they're reinvested. [/quote]

You're mixing two different things.  Capital gains taxes are for realized capital gains (ie, appreciation).  For example, let's say you buy 1 share of stock for $100.  You hold it in your account and it appreciates in value.  Let's say it grows so it's worth $150.  That's $50 in appreciation.  But you don't pay any taxes on that appreciation until you sell the stock.  So, if you sell it for $150, you pay capital gains tax on the $50 in appreciation.  If you just hold the stock, you don't pay capital gains taxes.

Dividends are capital distributions.  So, in the example above as you were holding that single share, you maybe received a dividend each year.  Let's say that, in addition to and separate from the appreciation (ie, the growth in the value of the stock) you also receive a $5 dividend from the stock.  That $5 dividend is *ordinarily* taxable as regular income taxes (at your regular income tax bracket).  Even if you "reinvest" the $5 dividend, it is still *ordinarily* taxable as income.

So, you'd pay your regular income tax rate on the $5 dividend each year.  And then when you sell the stock you'd pay capital gains tax on the $50 in appreciation as a one-time tax.

(*note, some dividends are called qualified dividends and for those you pay capital gains taxes.  Other dividends are nontaxable entirely.*)[/quote]

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