While we were thinking that the financial industry is in shambles and that they need all kinds of help, the banks are quietly racking up billions. Wells Fargo reports that they believe they will make $3 billion in the 1st quarter. With record deposits, ultra low interest rates from the fed, retail banks are making a ton of money in this environment. Obviously, the big question is whether the loan losses will slow down and be small enough so that the banks can absorb them, but trying to project the outcome is why investing is fun right?

Personal Finance Articles

• Want further proof that retail investors can’t time the market?  Oblivious Investor cites a study that investors lost $100 billion in 2006 trying to do so!
• I actually found a great bank that offers checking abilities and an ultra high yield (even higher than savings accounts).  Check out my EverBank Review at MoneyNing.
• I wrote about and linked to this piece before, but it is worth mentioning again.  Dividend yield is very important and ABC talks about what it is.
• For those that still don’t know, TradeKing is offer a promotional $150 of transfer fees if you decide to switch over to them.  I highly recommend them (actually, I plan to switch from my Etrade account as well based on what I’ve seen).

Carnival

• Carnival of Debt Reduction
• Carnival of Bankruptcy Access
• Carnival of Twenty Something
• OneMint Carnival
• How to Administer Your Money
• Financial Crisis Carnival

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Related Articles at Investing School:

• Weekend Investment Reading – What a Week
• Weekend Investment Reading – Happy Holidays Edition
• WIR – What a Week in the Stock Market
• Weekend Investing Reading (WIR)
• Weekend Reading – Housing Needs to Improve

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While we were thinking that the financial industry is in shambles and that they need all kinds of help, the banks are quietly racking up billions. Wells Fargo reports that they believe they will make $3 billion in the 1st quarter. With record deposits, ultra low interest rates from the fed, retail banks are making a ton of money in this environment. Obviously, the big question is whether the loan losses will slow down and be small enough so that the banks can absorb them, but trying to project the outcome is why investing is fun right?

Personal Finance Articles

• Want further proof that retail investors can’t time the market?  Oblivious Investor cites a study that investors lost $100 billion in 2006 trying to do so!
• I actually found a great bank that offers checking abilities and an ultra high yield (even higher than savings accounts).  Check out my EverBank Review at MoneyNing.
• I wrote about and linked to this piece before, but it is worth mentioning again.  Dividend yield is very important and ABC talks about what it is.
• For those that still don’t know, TradeKing is offer a promotional $150 of transfer fees if you decide to switch over to them.  I highly recommend them (actually, I plan to switch from my Etrade account as well based on what I’ve seen).

Carnival

• Carnival of Debt Reduction
• Carnival of Bankruptcy Access
• Carnival of Twenty Something
• OneMint Carnival
• How to Administer Your Money
• Financial Crisis Carnival

—
Related Articles at Investing School:

• Weekend Investment Reading – What a Week
• Weekend Investment Reading – Happy Holidays Edition
• WIR – What a Week in the Stock Market
• Weekend Investing Reading (WIR)
• Weekend Reading – Housing Needs to Improve

Bookmark It

Hide Sites

In an effort to separate investing for long term wealth creation versus short term speculation, the IRS taxes investment gains (known as capital gains) at a different tax rate. Whether it’s gains or losses, there are basically two categories that we are concerned about: long term and short term.

Long Term Versus Short

To determine whether the capital gains qualifies as short or long term, we should first determine it’s holding period (the time which the security is held). The calculation is based on the trade dates, not the settlement dates so if you bought a stock on February 6th, then you will have held onto the stock for one day on February 7th. Also note that the holding period is calculated based on the day of the month and not the number of days, so your holding period is one month on March 6th, two months of April 6th etc.

If you sold an asset that you held for a year or more, then it’s considered long term. Otherwise, it’s short term in IRS’ eyes.

Capital Gains are Taxed Based on Holding Period

So why is long and short term important? Because the IRS taxes them differently. As of writing, long term gains are taxed at 5% (for people in federal tax brackets in 10% and 15%) and 15% for the rest of the taxpayers. In contrast, short term gains are taxed as regular income tax rate.

Therefore, there is a big incentive for people to hold onto their investments. Let me give you an example. If you are in the 33% federal tax bracket, short term gains are taxed at 33% while long term gains are taxed at 15%, which is less than half!

Capital Gains and Adjusted Gross Income

Whether it’s long or short term, your net capital gains (or losses) are included in your adjusted gross income (AGI). This plays a big part in your taxes because that number is used to calculated your tax bracket, tax credits, as well as stimulus payments etc.

The only exception is that you can only deduct a maximum of $3,000 from your AGI in any given year even if you have more capital losses than that. The IRS however do let you carryover the losses for future years so if you had huge losses one year and never make any gains every again, you can theoretically take a $3,000 loss every year (until they change the laws of course). Note also that the carryover stops when you die, so there are no inheritance for carryover capital losses.

What Capital Gains Mean for Us

It is an important investment lesson to know that long and short term gains shouldn’t drive one’s investment decisions. While the tax rates difference is enormous, asset prices can change value much severe than that in a very short amount of time. Therefore, note that tax concerns should play only a small part of the overall investment decision.

In short, be mindful of capital gains but don’t let it be the only reason why you buy or sell.

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Related Articles at Investing School:

• Realized and Unrealized Gains and Losses
• 14 Facts About Form 1040 Schedule D for Investors
• What are Exchange Traded Funds (ETF)
• EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization
• Index Funds Explained

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Cogent (COGT) can be identified as a government contractor. For this reason COGT should benefit from the stimulus bill that the Obama presidency recently passed as spending on new programs will continue to grow.

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How often has the term ‘depression’ been used to describe the conditions in the US and global economies? What are the symptoms of this infrequently experienced economic storm? These are the questions that will shape the dollar’s future not just a week ahead but for months to come. DailyFX provides the latest in forex trading news.

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