Long-term capital gains tax is a tax applied to assets held for more than a year. The long-term capital gains tax rates are 0 percent, 15 percent and 20 percent, depending on your income. These rates are typically much lower than the ordinary income tax rate.

How long do you have to hold a stock to get taxed?

You must own a stock for over one year for it to be considered a long-term capital gain. If you buy a stock on March 3, 2009, and sell it on March 3, 2010, for a profit, that is considered a short-term capital gain.

How do I not pay taxes on stocks?

Avoiding the Capital Gains Tax

1. Hold investments for a year or more.
2. Invest through your retirement plan.
3. Use capital losses to offset gains.
4. Sell investments when income is low.
5. Donate your stock and kill two birds with one stone.
6. Don’t sell, just die.

What kind of tax do you pay when you sell a stock?

First, determine how long you owned the stock before selling it. If you’ve held it for less than one year, you’ll owe short-term capital gains taxes. That rate is the same as your regular income tax rate. So, if you pay taxes of 24 percent on all your other income, you’ll also pay 24 percent on the amount you earned by selling a short-term asset.

When to track the cost basis of stock?

If investors bought the stock within the past two years, in most cases, it’s the brokerage’s responsibility to track the cost basis. But if the stock was bought many years ago, or the shares were inherited, investors may not have easy access to the cost basis.

What happens when you get a stock as a gift?

If someone gave you the stock as a gift, the basis is the lower of the fair market value on the date the gift was made, or the original price your gift-giver paid for the stock. After subtracting your basis from your profit, you may also be able to lower your taxable capital gain by deducting management fees.

Do you have to pay taxes on dividend income?

But if your stock holdings pay dividends, you may earn dividend income even without selling any assets. In that case, the tax you owe depends on the type of dividends you earn. Ordinary dividends are taxed at regular income tax rates rather than at capital gains rates.