It’s so easy to shop from the comfort of your couch, but it’s not always smart. Luis Molinero / Shutterstock.com
Shopping online is so temptingly easy. There’s no need to drive or even walk to a store. You can just browse and order via your laptop or cellphone at any time of the day or night. And you can take all the time you need perusing different fashions, books, gadgets or more. But every temptation comes with its problems. Even if you have the bank account of billionaire Warren Buffett…
Selling a stock at a profit has tax implications. Read on to learn more.
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The whole point of investing is to make money — at least over time. But there may come a point when you decide to sell a stock for a price that’s higher than what you paid for it.
Generally, it’s a good idea to hold stocks in your brokerage account for many years so your shares can appreciate in value over time. But a company or market event could make it so the value of a given stock of yours shoots up overnight. And if you’re not sure that higher price is sustainable, then it could pay to sell your shares right away, when you know you’re able to profit.
When you sell shares of stock for a higher price than what you paid, you’re liable for capital gains taxes. But the amount of time you hold your shares before making that sale will determine what your tax bill actually looks like.
The upside of holding stocks in an IRA account is that you’re not taxed year after year on gains in your account. Rather, those gains are tax-deferred, so you don’t pay taxes on them until you’re ready to take withdrawals from your savings.
But brokerage accounts work differently. Since these accounts don’t come with the same strict rules as IRAs (like imposing annual contribution limits and penalizing you for taking withdrawals prior to age 59 1/2), they also don’t give you a tax break on your money. So if you sell stocks at a profit in a regular brokerage account, you face a tax bill for the year you make your profit. In other words, if you sell stocks at a profit this year, you’ll owe more on your 2023 taxes.
Now, the amount of tax you’ll owe will depend on how long you hold your shares. If you hold your stocks for a year or less, you’ll land in the short-term capital gains tax category. And your tax rate on your gains will be the same as your ordinary income tax rate.
So, let’s say you’re single earning $80,000 a year. That puts you in the 22% tax bracket, which means that’s the amount of tax you pay on your highest dollars of income. If you sell stocks you bought for $1,000 for a price of $2,000, you’ll have a $1,000 profit. You’ll then be taxed at a rate of 22%, making your tax bill from that sale amount to $220.
But things are different if you hold your stocks for at least a year and a day prior to selling. In that case, you’ll be bumped into the more favorable long-term capital gains tax category.
Long-term capital gains taxes also depend on your income. But the rates are much lower than what you’ll pay on short-term gains.
If you’re single earning $44,625 or less, you actually won’t be taxed on long-term capital gains at all. And if you’re single and earning between $44,626 and $492,300, your tax rate will be just 15%. Long-term capital gains taxes top out at 20% for singles earning $492,300 or more.
So let’s go back to that $1,000 gain from the above example. Your $80,000 salary puts you in the 15% bracket for long-term capital gains taxes. That would leave you owing $150 on the sale of your stock, not $220.
In some cases, it really can pay to sell a stock right away at a profit, no matter the tax implication. But let’s say you’re eager to sell a stock at a profit that’s been relatively stable, and you’ve held it for 359 days. Waiting a week to lock that sale in could result in a much lower tax bill.
That’s why it’s important to know how capital gains taxes work, and to be mindful of your stock purchase dates before selling shares. Doing so could save you a lot of money.
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Mark your calendar now so you don’t risk a fine or miss an opportunity to save. Andrey_Popov / Shutterstock.com
Life moves quickly. It’s easy to get distracted. But that can be costly. Miss an important financial date or deadline, and you could be on the hook for a penalty or lose out on a limited-time opportunity to save money. Enter our “Money Calendar” series. In this edition, we’ve rounded up the noteworthy money dates in June 2023. Take a look and mark your calendar with any dates that apply to you.
Cryptocurrency is one of the most high-risk types of investments. Explore what you could be in store for if you put all your money into crypto.
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A big part of the appeal of investing in cryptocurrency is the chance to get a massive return on your investment. Because crypto is so volatile, it could make you rich. Or, you could lose practically everything you invested in the blink of an eye.
If you keep up with crypto at all, you’ve probably read stories about people who have put all their money in it. The lucky ones have even come out ahead, with some making millions of dollars. Success stories like these get a lot more common during bull markets, and they’re enough to make you wonder “what if?”
Discover: Best places to buy bitcoin
More: Check out our updated list of best crypto apps including one offer with a $100 crypto bonus
Let’s say you decided to invest all your money in crypto. While there’s no predicting exactly what the results would be, there are a few things you can expect with complete certainty.
There’s no overstating how volatile cryptocurrency is. Take Bitcoin (BTC) as an example. If you had invested in 1 Bitcoin at the start of 2020, it would have cost you $7,195. Here are some of the ups and downs you would’ve then experienced if you held on to your 1 Bitcoin:
April 14, 2021: $63,577 (up 784%!)July 21, 2021: $29,972 (down 53%)Nov. 10, 2021: $69,045 (up 130%!)Nov. 9, 2022: $18,562 (down 73%)
This kind of volatility is a whole lot easier to stomach when it’s all hypothetical, or when you have just a small portion of your portfolio in crypto. When crypto is 100% of your portfolio, the volatility becomes far less exciting and much more stressful.
One of the challenges of cryptocurrency is deciding where to store it. There’s no perfect solution, which is especially worrying if you put all your money in crypto.
The simplest option is to store your crypto with the app, exchange, or stock broker where you buy it. This works best from a convenience perspective, as you don’t need to transfer your crypto anywhere. Also, if you lose access to your account, you can reset your password to get back in. But storing your crypto this way also has some downsides:
Crypto exchanges are a popular target for scammers. You’ll need to keep your login information safe and watch out for phishing scams.You’re at risk of losing your crypto if the exchange goes bankrupt. As the collapse of FTX shows, exchanges aren’t always nearly as safe as they seem.
You could also use one of the many crypto wallets for storage. With a wallet, your crypto is entirely in your possession. That means you’re not at risk of losing it if the exchange where you bought it collapses. But if you lose access to your wallet and your recovery phrase for it, then you’ve lost access to your crypto, and there’s no way to get it back.
The best-case scenario is that your crypto investments are successful. To be clear, this is a long shot. Even if it happens, what comes next can be much more challenging than people realize.
Let’s say you had $50,000 to invest, and you put it all in crypto. Six months later, your decision was a success, and your investments are worth $100,000. Here’s the question — what do you do now? You could:
Keep everything the same and let it ride. After all, you don’t want to miss out if those cryptocurrencies continue to increase in value.Take some profits and also keep some money invested. For example, you sell $50,000 worth to get your initial investment back, and keep the remaining $50,000 in crypto.Sell everything and take your $50,000 in profits. This way, you’re not at risk if those cryptocurrencies decrease in value.
It’s a good position to be in, but it’s not an easy decision to make. And if you decide to sell anything, you’re going to owe short-term capital gains taxes, because you didn’t hold your investment for at least one year. Short-term capital gains are taxed as ordinary income. Depending on how much you make and your income from other sources, you could end up owing 30% or more of your profits in crypto taxes.
Many investors like to add crypto to their portfolio as an alternative investment. There’s nothing wrong with that, within reason. If you want to devote 5% to 10% of your portfolio to crypto because you think it’s the future or you’re excited about the profit potential, go for it. But putting everything in crypto isn’t recommended. It’s far too risky, which is the opposite of what you want in an investing strategy.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin and Target. The Motley Fool has a disclosure policy.
Investing your extra savings and watching it grow can be thrilling. But not all investments are good fits for everyone. Here are some ideas.
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So, you have an extra $500 and you want that money to grow. What do you do with it?
Sure, investing in the stock market is the obvious — and popular — choice. Some 58% of U.S. adults own stock. But that’s not the only — or always best — place you can put your money.
Let’s take a look at the options for a few places you could invest $500 and watch it grow.
Index funds are investments that track a market index, which are made up of stocks or bonds. Indexes can follow the stock market as a whole, or some subset thereof. For example, many popular index funds track the S&P 500.
The fund is designed to match the performance of the index it follows. Index funds can be a good choice for beginner investors because diversification is built right into the fund. It’s also super easy to get started since you only need to make a single purchase.
Sometimes you want to personally pick which companies your money is going to support. In that case, you could invest directly in those specific companies. You can buy stock in publicly traded companies right from your investment account.
For some companies with high share prices, you may only be able to purchase a fractional share. This is what it sounds like: a fraction of a share of stock. For example, if a given stock costs $1,000 a share, you could use your $500 investment to purchase half of a share.
Another benefit of fractional shares is that you can diversify your investments. For example, maybe there are 10 different companies in which you’d like to invest. You could put $50 into each company. Depending on their share prices, you may get more — or less — than one full share in each company.
What if you want to invest in other people, rather than companies? You might be interested in exploring peer-to-peer lending from the investor side.
Essentially, peer-to-peer lending platforms match individuals who need loans with investors willing to lend them money. So, you can join a platform, then explore potential investment opportunities. Good peer-to-peer lending apps will grade investments based on the risk level so you can manage your expectations.
And speaking of risk: As with any type of investment, there is risk involved when you invest in peer-to-peer lending. Specifically, if the borrower defaults on (stops paying) their loan, you’ll lose out on some or all of your investment. At the same time, the potential return can be large, especially on higher-risk loans (i.e., loans for folks with lower credit scores).
Government Treasuries are essentially loans you give to the government. They then pay you interest on that loan. For the most part, Treasuries are considered to be a low-risk investment since the U.S. government is usually not at risk of defaulting on its debt obligations (the current political climate notwithstanding).
There are a variety of different types of Treasuries in which you can invest depending on how long you want to invest and the type of return you’re after. I Bonds have been popular over the last year or so thanks to high inflation rates, but short-term T-Bills may be more attractive in an uncertain economic climate.
Ideally, your spare money should always be making you money. But you may not want it tied up in the stock market, loans, or even Treasuries, where it could take years to show results and/or become accessible.
One good alternative for many folks is a short-term CD (certificate of deposit). You can purchase a CD with a term of six months to a year that will earn 4.25% or more. Then, once the term ends, you can choose to withdraw your funds or roll them over into another CD.
If you’d rather your investments stay entirely liquid, you could opt for a high-yield savings account instead. While rates are generally (though not always) a bit lower than with a CD, you can withdraw your money whenever you need it.
There’s certainly a time and place for a little frivolous spending that boosts your morale or improves your quality of life. But in most cases, saving your money — through investments or even just your bank account — is going to be the better financial move in the long term.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
SNAP benefits are administered at a state level, and each state works differently. Find out when you’ll receive your food benefits and how to make the most of them when you do.
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The last few months have seen a lot of upheavals for a number of SNAP recipients. In March, extra pandemic benefits came to an end throughout the country. Some states had already stopped these extra payments. In those that hadn’t, people lost $95 or more a month — representing a significant hit to many households’ bank account balances.
More recently, food benefits have been pulled into the debt ceiling debate. As I write this, politicians haven’t agreed to raise the debt ceiling. It is almost certain that they will find a resolution, but if they don’t, it could delay a host of federal payments, including SNAP.
Most states pay SNAP benefits in batches, depending on your name, Social Security number, or case number. Your benefits will be paid to your electronic benefit transfer (EBT) card, which you can then use like a debit card in the store. If you have any queries about your food benefits, contact your local SNAP office.
Last year, the average monthly SNAP benefit per person was around $230, up about $100 from the amount given throughout the 2010s. In 2021, the USDA made significant updates to its estimates on what it costs for a family to eat healthfully. This led to a 21% increase in maximum benefits, according to the Center on Budget and Policy Priorities (CBPP).
SNAP benefits also get updated annually in line with inflation. The maximum benefit for a family of four in the 2023 fiscal year is $939, which is reduced depending on your income and other factors. The CBPP puts the average payment at $684. That works out to about $5.70 per person per day, which doesn’t go far if you’re trying to feed your family.
Here are some ways to get the most bang for your SNAP bucks:
Shop with a list: A list can help you map out your spending before you get to the store, particularly if you have a meal plan. It’s a great way to guard against impulse purchases and make the most of coupons or other discounts.Look for double up food programs: Schemes like the Double Up Food Bucks essentially give you two-for-one on fruit and vegetables at participating stores and farmers markets. To put it another way, if you had $10 to spend, you’d get $20 worth of healthy food.Use a cash back or coupon app: Several cash back apps will work with your EBT card. It can take a bit of planning and you’ll probably have to scan the receipt after you’ve shopped. But it is also a good way to earn cash back on your food spending.
If you don’t have enough cash to keep food on the table until your next SNAP payment, reach out to local food pantries and soup kitchens for help. You may need to be patient as there’s a lot of demand for food bank services right now. Nonetheless, it could help tide you over until you receive your June benefits.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
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