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Stocks are taxed in numerous ways depending on the type of stock, situation, and location of the investor. Let's explore some different types of taxation that apply to stocks in the United States.

Taxation of dividends: Dividends are taxed as ordinary income at an investor's marginal tax rate. If a stock is held in a qualified account like a 401(k) or IRA, the dividend is not taxed and it would be advantageous to make sure capital gains distributions from funds you own don't trigger taxes by keeping your taxable income below the threshold for higher tax brackets.

Taxation of capital gains: Capital gains are taxed as either short-term or long-term depending on how long you held the stock and if your marginal tax rate is higher for short-term or long-term gains. You can also lower your taxes by offsetting gains with losses. If you must sell to raise cash, you can realize losses on stocks held less than a year.

Taxation of option trades: When you trade options you are taxed like any other short-term capital gain or loss. If you hold the stock for more than one year (long term) before selling it then your gains and losses will be long term regardless of how long the options were held.

Taxation of foreign stocks: Trading on a US exchange, like the NYSE or NASDAQ, would be taxed as per above. If you hold an international stock in a non-US country then you may owe capital gains tax to that country and/or withholding tax if it is a corporation. Also, if you hold an international stock in a Roth IRA the gains would be tax-free.

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