January 25, 2014
What is the difference between a short-term capital gain and a long-term capital gain. Why should you care?
What is the difference between a short-term capital gain and a long-term capital gain. Why should you care?
Long-term capital gains are taxed at a much lower rate than short-term capital gains. You should care, because in order to achieve wealth, you have to know how to do so efficiently. The wisest way to invest money is to buy no-load index mutual funds and hold on to them for a long time.
You are exactly right, Katherine. Let’s recap.
Short-term capital gains (investments held 1 year or less) are taxed as ordinary income. Long-term capital gains (investments held more than 1 year) are taxed at the capital gains rate which could be 0%, 15%, or 20% for the very high earners.
Just as Katherine stated, you should buy no-load index mutual funds and hold them FOREVER. They are very tax efficient, which means they shoot out few short-term capital gains in any given year. Focus on saving your money and investing it wisely as you realize that amazing thing called compound interest. Start today!
You can learn more on this subject and other tax information by going here:http://taxes.about.com/od/Federal-Income-Taxes/fl/Federal-Income-Tax-Rates-for-the-Year-2014.htm.