In this situation, depending on your taxable income, you'll usually be taxed at 0%, 15%, or 20%.Īs an example of both, let's assume you're a single filer earning $100,000 of income and purchased $10,000 of a stock market index fund on June 1, 2019. Long-term gains: If you purchase shares of stock and sell them for a gain after holding for more than a year, you generally recognize a long-term capital gain.When this happens, Robinhood, Betterment, Stash, Acorns, or another investing platform may issue you a Form 1099-B during tax season highlighting your short-term capital gain. Short-term gains: If you buy an asset, hold it for one year or less, and sell it for more than you paid, you generally recognize a short-term capital gain.It's also important to know why the holding period matters and how you can use tax-efficient investing strategies to get better results. You'll want to become familiar with the tax implications of selling for a gain or loss. The type of capital gain will depend on the amount of time you held the stock before selling it. In the case of stocks, when it comes time to sell, if the sale price is greater than your cost, you'll realize a capital gain. When you invest, you pay money now for an asset that you hope will increase in value later. To learn more about tax-efficient investing, let's review some common tax rules when it comes to investments. If you recognize a gain by selling stock on Robinhood or an exchange-traded fund on Betterment, or if you receive interest income from a bond index fund on Acorns, you'll face tax consequences if these actions occurred in a non-tax-advantaged account. However, despite the availability of new tools and lower transaction costs, the amount you pay in taxes as a result of your investing decisions generally remains the same if these trades happen in an after-tax brokerage account. As technology grows and investing tools become more commonplace, there’s plenty to keep in mind to ensure you're minimizing your tax liability.
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