What is the impact of capital gains tax on my investments?

What is the impact of capital gains tax on my investments?

Capital gains tax affects your investment returns by taxing the profit you make when selling an asset. Higher taxes can reduce your overall gains.

How does it differ for short-term and long-term investments?

Short-term capital gains are taxed at your ordinary income tax rate, while long-term gains benefit from lower tax rates, encouraging longer holding periods.

Can you give me an example of how this works?

Sure! If you buy a stock for $1,000 and sell it for $1,500 after a year, a short-term gain might be taxed at 24%, while a long-term gain could be taxed at 15%.

What strategies can I use to minimize capital gains tax?

You can consider holding investments longer, using tax-loss harvesting, or investing in tax-advantaged accounts like IRAs.

Are there any recent changes in capital gains tax laws I should be aware of?

Yes, tax laws can change frequently. It's best to consult a tax professional or check the IRS website for the latest updates.