Tax

12 concepts in this category.

• Tax-Loss Harvesting

  If you're up $10,000 on Apple but down $3,000 on another stock, you can sell the loser to offset $3,000 of your Apple gains. You only pay tax on $7,000 instead of $10,000. The IRS lets you use losses to cancel gains.

• Wash Sale Rule

  If you sell a stock at a loss and buy it back within 30 days (before or after), the IRS disallows the loss. This prevents you from harvesting losses while staying invested. To avoid it, buy a similar but different stock.

• Short-Term Capital Gains

  If you buy a stock and sell it within a year for a profit, the IRS taxes that gain at your regular income tax rate (up to 37%). That's much higher than the 15-20% rate for stocks held longer than a year.

• Long-Term Capital Gains

  Hold a stock for more than a year before selling and you get a special lower tax rate — 0%, 15%, or 20% depending on your income. That's much better than paying your regular income tax rate on short-term gains.

• Cost Basis

  If you buy 10 shares at $100 each, your cost basis is $1,000. When you sell for $1,500, you're taxed on the $500 gain, not the full $1,500. The cost basis is your starting point for tax calculations.

• Capital Gains Tax

  When you sell an investment for more than you paid, the profit is a capital gain and the government taxes it. Hold less than a year = higher rate (up to 37%). Hold more than a year = lower rate (0%, 15%, or 20%).

• Carryforward Losses

  If you lose $15,000 on investments but only have $5,000 in gains and can use $3,000 against income, you have $7,000 left over. You can 'carry forward' that $7,000 to use in future years when you have gains.

• Annual Loss Limit

  Even if you lose money in the stock market, you can use up to $3,000 of those losses to reduce your regular taxable income. Lose $10,000? Deduct $3,000 now and carry the rest forward to future years.

• Tax Bracket

  The US has a progressive tax system. You don't pay the top rate on all your income — just on each dollar above specific thresholds. Knowing your bracket helps you understand if gains will be taxed short-term or long-term preferential rates.

• Qualified Dividends

  Most dividends from US companies held long enough are 'qualified' and taxed at the low capital gains rate (0-20%) instead of ordinary income rates. Non-qualified dividends (like REITs) are taxed as regular income.

• Tax Year

  A tax year is the fixed twelve-month period a tax authority uses to total up gains, losses, and income for a single return. Many countries use the calendar year (January to December), but others use a different twelve-month period — the exact dates, and what counts as a completed sale within them, are set by each country's own tax rules.

• Replacement Securities

  After selling a stock at a loss for tax purposes, you can't buy it back for 31 days (wash sale rule). Instead, buy something similar — like selling SPY and buying IVV (both track the S&P 500) — so you stay invested while harvesting the loss.