When it comes to investing, timing really is everything. Proper planning can help you time your transactions and make tax-efficient investing decisions.

Let's review the current tax breaks for investors.

Capital Gains & Losses

The capital gains tax affects millions of American investors. Capital gain is the profit you make on the sale of a nonbusiness investment, and certain business investments, that have increased in value.

Not only do you need to be concerned about an investment's price when you sell, but you should also look at whether selling makes sense from a tax standpoint. As the result of favorable reform in the past, gains on most assets held over a year will be treated as long-term capital gains. In December 2017, the Tax Cuts and Jobs Act changed the brackets for long-term capital gains and dividends. From 2018-2025, the rates have their own brackets which are no longer tied to the ordinary income brackets. Below are the 2019 brackets for long-term capital gains and dividends:

2019 Long-Term Capital Gains and Dividend Brackets
  Single Joint Head of Household
0% tax bracket $0-$39,375 $0-$78,750 $0-$52,750
15% tax bracket $39,375-$434,550 $78,751-$488,850 $52,750-$461,700
20% tax bracket over $434,550 over $488,850 $461,700


Capital gains attributable to depreciation from real estate held longer than 12 months are taxed at a 25% rate. The gain on collectibles and certain small business stock is taxed at 28%.

The long-term capital gains rates only apply to investments held for more than 12 months. Short-term gains on assets held less than one year are subject to tax at your regular income tax rate. So, unless you're holding a really volatile stock where the bottom might drop out at any minute, hang on to it for at least a year. Even if the stock price drops a little, you may cut the taxes on the profit nearly in half if you wait.

Timing is also important at the end of the year. If you've cashed in some big gains during the year, review your portfolio for unrealized losses. You may want to sell off stock unlikely to rebound and use the losses to offset your gains. If you end up with more losses than gains, you can use $3,000 of losses against other income and carry over the remainder of the losses to next year.

Always review gains and losses before the end of the year so you can offset gains and make sure you've paid enough in estimated taxes. Carefully planning transactions may lower your tax bill.

When selling shares of stock that you purchased at different prices at different times, inform your broker beforehand that you are selling the shares with the highest basis. This will minimize taxable gain or maximize deductible loss.