What is a long term capital gain and why should you care?
Long term capital gains are gains on assets that are held longer than one year. You should care because they are taxed at a much lower rate than short term capital gains. You can take advantage of this by investing you money to make long term gains that you pay much lower taxes on.
Long term capital gains are the incress in the value of assets you own for over a year. They have a different tax liability that could make it so you pay less taxes overall. Since it is passive income you do not pay Fica on it and you pay the capital gains tax rate for it which is less then the earned income rate. If you raise your passive income you can raise your income without really having to work much more.
Great answers, gentlemen. Let’s review.
Long term capital gains are received when your investments are held for more than one year before selling. They are also taxed a very low rate relative to regular income taxes. For the people in the 10% and 15% tax brackets, the long term capital gain rate is 0%!
When buying investments outside of retirement accounts, focus on stock index funds that do very little buying and selling (that incurs short-term capital gains, which are taxed at the regular income tax rates). The Total Stock Market Index Fund and the Total International Stock Index Fund at Vanguard would be two very good options. Educate and ACT!!!!!!!!!!
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