As IPOs such as Spotify and Lyft are listing at a higher than expected premium, many investors look to cash in on this trend by selling the shares. Did you know there are tax implications when you do this, which can hinder your ability to maximize returns?
Check out what’s the right way listing gains are taxed with the example of Nykaa.
If you buy shares and they go up in price, you have a capital gain. If you make a capital gain on share certificates that are more than 12 months old then this is considered long term capital gains tax.
Short-term or Long Term Capital Gain?
This is one of the most common questions among investors in the stock market. But it’s very important to understand that there are many different types of investments out there, and not all have tax implications. If a person invests in stocks, bonds or mutual funds, they should consult with their financial advisor before making a decision
There are two types of capital gains – short-term and long-term. Each type has its benefits and drawbacks, but the IRS taxes them differently.
Short-term capital gains are profits on investments that were held for one year or less. Investors have to pay a higher tax rate as compared to that of long-term capital gains which are profits on investments that were held for more than one year. Short-term capital gains also result in a larger tax bill if the gain was large because the investor added money after holding the investment for less than a year.
Setting Off Of Short-Term Capital Gain Against
Capital Loss
If you have any short-term capital losses, you can offset them against short-term/long-term capital gains. However, long-term capital losses can only be offset against long-term capital gains.
If you are unable to deduct it in this tax year, you can carry it forward for a period of 8 or more years if your income tax return is filed this year.