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Profit that's been locked in by actually selling the investment.
Why It Matters
Once you sell, your gain becomes realized - it's real money you can spend (minus taxes). The moment you realize a gain, the IRS wants their cut. If you held over a year, you pay lower long-term capital gains rates (0-20%). Under a year, it's taxed as ordinary income (up to 37%). This is why buy-and-hold is so tax-efficient.
Key Points
- Realized gains are taxable in the year you sell
- Long-term (held 1+ year): 0%, 15%, or 20% tax rate
- Short-term (held under 1 year): taxed as ordinary income
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Investment Taxes 101
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Related Terms
Common Questions
Profit that's been locked in by actually selling the investment. Once you sell, your gain becomes realized - it's real money you can spend (minus taxes). The moment you realize a gain, the IRS wants their cut.
Once you sell, your gain becomes realized - it's real money you can spend (minus taxes). The moment you realize a gain, the IRS wants their cut. If you held over a year, you pay lower long-term capital gains rates (0-20%). Under a year, it's taxed as ordinary income (up to 37%). This is why buy-and-hold is so tax-efficient.
Realized gains are taxable in the year you sell
Long-term (held 1+ year): 0%, 15%, or 20% tax rate
Short-term (held under 1 year): taxed as ordinary income