Tax code for investing

In these troubled economic times it is important for all of us to take stock of the situation and to become educated about the market. Few of us realize that there are some serious problems with the economy right now and that these changes could affect us directly. Banks are having a hard time lending money to people and many are getting layed off. It is extremely difficult to figure out what will happen in the long or the short term with the stock market suddenly shifting every couple of minutes. Since it is so important for us to become educated about the different parts of our economy and the way that the economy relates to our government, we need to learn about things like the tax code and how it relates to investing. It will only be when we learn about these sorts of things and are willing to use them responsibly that we will be able to fix the crisis and help to prevent something like this from happening in the future. Learning is the key, as it is with so many things in life.

The tax cod for investing is extremely complicated and we can only talk about a few elements of it here. Probably the most important thing to know about is that the IRS taxes short and long term gains on investments in different ways. The short and long term of an investment are determined by the holding period, which means the amount of time you actually held the investment after purchasing it and before selling it. The holding period begins the day after you purchased the investment. Short term investments are investments held for twelve months or less. Long term investments are those held longer than twelve months, and these are taxed quite differently.A short term gain is taxed like any other piece of income, so it is fairly easy to see what your taxes will be on the short term gain. For long term gains the taxes are a bit more complicated. The rate depends on your income bracket. If you are in the ten or fifteen percent bracket you will pay five percent. The rate goes up much higher as you fall into different brackets. In order to find out exactly what you would pay you will need to figure out your tax bracket and then consult the rates. You will see that it makes a big difference in terms of taxes as to whether or not you pay on the short term or on the long term gain.

Knowing a few things about investment tax codes is a very important part of what you will need to know to invest. These are the sorts of things that a financial adviser would need to know to help give you investment advice. Shouldn't you also know about tax laws if you are going to be investing? Even if you have a financial adviser you should know why your adviser is advising in the way that they are.

Educating yourself about taxes is a big deal when it comes to investing. If you want to be a responsible investor you need to start thinking about taxes. You can make or break your investments if you are not careful about what the government takes as its share. In troubled times you should always consult a financial investor before making any serious investments. Recognize that an investment made at the time of recession will probably loose value before it gains. Be prepared to loose and hold onto the investment until it recovers.