Capital gains and US taxation....

[recycled sixtie]

I seem to remember somebody saying recently that the stock market was getting toppy and he sold all his stocks and was going to wait until the next recession before he invested again.

However the problem I see with that is the capital gains on the stock/mutual fund would be taxed at the end of the tax year? Unless some kind of a trust was set up to defer taxes?

How does this work in the US? Here we pay capital gains on stocks and mutual funds and I question whether it is worth it to sell these things until you have to. Riding out the ups and downs can be tough to stomach but timing the market is challenging.

Your thoughts?

Guy

[KFC911]

Originally Posted by recycled sixtie

....but timing the market is challenging.

Your thoughts?

Guy

Opens at 9:30, closes at 4:00 most days ...but that's it for me
Kept in a tax deferred acct like 401K/IRAs, it's a non-issue for many here.

[masraum]

Originally Posted by recycled sixtie

However the problem I see with that is the capital gains on the stock/mutual fund would be taxed at the end of the tax year? Unless some kind of a trust was set up to defer taxes?

How does this work in the US? Here we pay capital gains on stocks and mutual funds and I question whether it is worth it to sell these things until you have to.

In the US, if you buy a stock, and sell it in less than a year (and make money), then you'll pay capital gains at the full tax rate that you pay for income (lets say 25%). If you buy stocks and hold them for more than 1 year, then sell them, you'll pay long term capital gains which is taxed at a lower rate (meants to encourage long term investment) of 15%.

Riding out the ups and downs can be tough to stomach but timing the market is challenging.

Riding out the ups and downs long term is my strategy. Most folks get the timing all wrong and lose money.

[Gogar]

If he was trading in an IRA account, then YES there is some benefit to going all cash and waiting out the storm (if he feels like he can time it right), as he will pay the same tax rate regardless when he starts using the IRA later.

As far as a regular Brokerage account, you just have to do the math. your regular tax rate vs. the Long-term rate. And the cost of all the commissions and fees to "go cash."

There's also a few rules where you can't jump out of something and back into it to take the loss on paper.