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Nobody likes the “t-word” but it’s something all investors have to address.
So we’re going to have that talk today…
We’re going to talk about taxes.
When you’re trading and investing, all your profits will be taxed.
Profits are classified as either:
This is important because these two gains are taxed differently.
Capital gains tax applies to stocks, bonds, precious metals, jewelry, and real estate… these are known as capital assets.
When you sell a capital asset for a profit it’s called a capital gain.
A short-term capital gain means that you’ve owned the asset for less than a year.
These gains are taxed as ordinary income.
So if you held a stock for less than a year and sold it for a profit…
Unfortunately, you’ll be taxed at your ordinary income rate.
But if you held a stock for one year and one day…
It’s considered a long-term capital gain.
A long-term capital gain means that you’ve owned the asset for longer than a year.
These gains are subject to a tax rate of 0%, 15%, and 20% depending on your income.
As a ballpark figure, anywhere around $40,000 to $500,000 will fall under the 15% tax rate.
That’s why many investors will hold onto stocks for over a year, just to lower their tax rate.
Note: It’s worth mentioning that the capital gains tax for collectibles - such as art, jewelry, and precious metals - is always 28% regardless of income.
Of course, you don’t have to worry about taxes until you start earning consistent income from the stock market.
At Stock Navigators, we make money by Echo Mapping the stock market.
It’s a simple, step-by-step trading strategy that identifies high-probability trades before they take off.
We’ve recorded a very special podcast that explains everything about Echo Mapping and how you can get started today.
Stock Navigators has one mission - to help people improve their lives via trading. And it's all made possibly by our team of stay-at-home day traders who provide the most up-to-date analysis every single day. With over twenty years of combined trading experience, Stock Navigators helps you stay on top of the market.
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