According to the abundance of phone calls we have been taking the last few weeks, it seems some of you may be happy about recent pricing of your company stock holdings! While it’s normal to get excited and sell some shares, you should always consider capital gains taxes. Capital gains taxes apply when you sell a stock for more than you paid for it, and the profit—known as a capital gain—is subject to taxation by the IRS. The rate you pay depends largely on how long you held the investment: short-term capital gains (for assets held one year or less) are taxed at ordinary income tax rates (usually the higher rate of the two), while long-term capital gains (for assets held more than one year) are typically taxed at lower rates. These long-term rates are often 0%, 15%, or 20%, depending on your taxable income and filing status. So, be careful and watch as you are selling any stock or investments/securities. NOTE: If you don’t select which shares you want to sell, the Fidelity trading platform is set up on the FIFO method (first in, first out) and will start selling your oldest shares first! For some of you who have been around a long time, that means you could have some really low cost basis shares that would be sold and leave you with a higher tax burden! Instead, you can select the specific shares you want to sell. So, look for the ones that are labeled “Long” term not “Short” term. Then, pay attention to the cost basis (the price you paid for the shares). The higher the purchase price, the less potential capital gains tax. It’s important to remember that taxes will be due on any capital gains when you file your taxes next year so plan accordingly!
CalmWater Financial Network®, 3204 W Benjamin Ave, Suite 200, Norfolk, NE 68701 ~ (402) 371-5511
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth.
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