Taxes and Investment Gains Correlation

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Taxes play an important role in your investment strategy, regardless of your tax bracket. That’s why understanding how short and long-term term capital gains impact your investments over time can be critical. Below is a quick explanation on how that works.

Taxes and Investment Gains

Simply put, short-term gains are realized on investments held for under a year, while long-term capital gains are derived from investments held for more than one year. For example, if you purchase 100 shares of stock for $20 per share and sell them six months later for $25 per share, the $500 in profit is considered a short-term capital gain by the IRS and taxed at as ordinary income. Conversely, if you wait more than a year to sell the shares, they will be taxed at the long capital gains rate of 15% to 20%, depending on your tax bracket.

For investors in higher tax brackets, this rate can be substantially lower than the rate applicable to short-term gains.

Depending on your tax bracket, if you held the same shares for a year or more, you could end up making more money if the stock price continues to increase but still pay less at tax time. In addition, only your net investment income is taxable, meaning if you gain $500 from one investment but lose $500 on another in the same tax year, then your net gain is $0 and you are not required to pay any additional taxes.

This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

If you’d like to learn more about the relationship between investments and taxable gains in your portfolio, contact the UCC Financial Group at (801) 223-7502.

Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC.
Cetera is under separate ownership from any other named entity.

Not NCUA/NCUSIF Insured – No Credit Union Guarantee – Not A Deposit – May Lose Value
Not Insured By Any Federal Government Agency.

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