Do You Know How Much You Pay in Investment Taxes?
Taxes can create a huge drain on your investment returns if you're not careful. It's important to keep taxes in mind when you're choosing which types of assets to invest in and what kinds of accounts to stash them in. Matching the right investment with the right account can cut your investment taxes enough to boost your portfolio's profits by a few percentage points.
Here's what you need to know to minimize the taxes you pay on your investments.
Any time you sell an investment at a gain, you're opening yourself up to capital gains taxes. This is a tax on the profits you make from selling an asset, and the tax rate you pay depends on how long you've owned the asset. If you've owned it for more than a year before selling, it's categorized as a "long-term investment" and will be taxed at the relatively low long-term capital gains rate. If you've owned it for one year or less, you'll be charged the short-term capital gains rate instead, which is always equivalent to your highest tax bracket for the year.
Source: Fool.com
