Will I Have to Pay Tax on the Sale of My Investment?
Having the value of your investments increase is a great feeling! Don’t forget about tax consequences of selling your investments though, as it can costs you thousands of extra on tax day if you aren’t careful. Typically, any investment held outside of a qualified plan or annuity (think 401(k), IRA, etc.) will have tax consequences when sold. Below are a couple of common situations you should be careful of.
You Held the Investment For Less Than a Year
When selling an investment you held for less than a year, you will pay ordinary income tax rates instead of long-term capital gains rates. For high-income earners, this can mean paying up to 37% tax vs. up to 20%! In most circumstances, you should never sell investments held less than a year if you can avoid it.
You Have an Investment Loss
Nobody likes having a loss on your investment, but having a loss isn’t all bad. If you sell an investment with a loss in a taxable investment account, you will not have to pay any tax, and it will also reduce taxes paid on future capital gains.
Check Out Our Flowchart
To see our easy-to-read flowchart that will help you determine the tax consequences of selling your investments, click here. Always consult your tax advisor before you sell any investment.
Schedule Your Free Consultation!
If you would like to schedule a call to talk about the best tax strategies or other investment advice, please give us a call at 303-440-2906 or click here to schedule a time to speak with us.
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.