Holding Period

Category: tax

The length of time an asset is held before it is sold, determining the applicable tax rate.

Hold it for less than a year? You pay "short-term" rates, which are just your regular income tax rates (often 30%+). Hold it for more than a year? You get "long-term" rates (usually 15% or 20%). The difference in tax savings is massive.

Common Examples

• We timed the sale to ensure the stock cleared the one-year holding period, locking in the significantly lower long-term capital gain rate.
• Short-term capital gains are taxed as ordinary income, which can be a major tax trap if not planned for in your annual return strategy.