Can I Reduce Capital Gains Taxes by Waiting a Year Before Selling?

Yes — one of the simplest and most powerful tax strategies in investing is holding an asset for more than one year before selling. Short-term capital gains (held 12 months or less) are taxed at your ordinary income rate — up to 37%. Long-term capital gains (held more than 12 months) are taxed at 0%, 15%, or 20% depending on your income. For many taxpayers, waiting just one day past the one-year mark can cut the tax rate on the gain in half or more. This applies to stocks, real estate, and most other investment property. The lower long-term rate is one of the main reasons a buy-and-hold investment strategy is so tax-efficient.