Selling Investments at a Profit? This Tax Strategy Could Save You a Ton of Money
Your goal in investing should be to grow your wealth, and holding onto stocks for a long time is generally the best way to do that. But still, you may find yourself wanting to sell a stock at a profit in the near term, whether because you need money or you feel you have a key opportunity to cash in at a high.
But just as the IRS is able to collect taxes on your regular earnings, so too is it entitled to a piece of your profits when you sell stocks for more than what you paid for them. It's a concept known as capital gains taxes, and unless you're housing your investments in a retirement savings plan like an IRA or 401(k), you'll be liable for those taxes year after year.
But not all capital gains taxes are created equal, and if you're going to sell an investment at a profit, here's one important rule to try to follow: Make sure you hold that stock for at least a year and a day before selling it off. Doing so could make a huge difference as far as your tax bill is concerned.
Source Fool.com
