Short term capital gains tax rate 2016-14

Founded in by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. This article was updated on January 6, Long-term capital gains are taxed at a lower rate than you might expect. While short-term gains are taxed at the same percentage rate as your U.

In fact, in some circumstances, you may pay nothing at all in taxes on your long-term gains. Defining terms Let's start with some definitions.

Long-term capital gains stem from assets you've held for more than a year -- that's days or longer. Short-term capital gains are from assets held for a year or less. The Roth exception If your long-term capital gains occurred within a Roth IRA -- for example, you bought a stock in your Roth, held on for years, and then sold the shares within the Roth, realizing a gain -- you can end up paying no taxes at all on the gain.

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But those following the rules with a Roth IRA get to enjoy its raison d'etre -- tax-free growth and withdrawals. Withdrawals from traditional IRAs are taxed at ordinary income tax rates.

Roth k s, meanwhile, a relatively new option at many workplaces, offer tax-free withdrawals like Roth IRAs. Wipe out the tax with losses Another way to avoid paying long-term capital gains taxes is to offset your gains with losses. If you still have more losses, they can be carried forward into future years to reduce future taxes. Having gains means you've been investing effectively, ideally accumulating critical retirement assets or achieving other financial goals.

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With your investments, remember that hanging on to stock in healthy, growing companies over many years is a great way to build great wealth. A short-term focus can be counter-productive, generating higher tax rates and commission costs. Long-term investing is a smart strategy and offers lower long-term capital gains tax rates, as well.

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The Motley Fool has a disclosure policy. Selena Maranjian has been writing for the Fool since and covers basic investing and personal finance topics. For more financial and non-financial fare as well as silly things , follow her on Twitter Skip to main content The Motley Fool Fool.

Long-Term Capital Gains Tax Rates in -- The Motley Fool

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