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Reinvesting Capital Gains to Avoid Tax

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perdiempt
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Reinvesting Capital Gains to Avoid Tax  Reply with quote  

From what I am reading on the internet, capital gains are not taxable unless they are realized gains. Does this mean that if I consistently reinvest all capital gains and dividends, I will not have to pay taxes until I sell the shares, even if I don't sell until 20 years from now?
Post Fri Oct 31, 2014 3:29 am
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blixet
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In a tax deferred account, yes, if by sell you mean withdraw from the tIRA or 401k,etc. In a taxable account, no. Gains and divies reinvested have been realized and distributed. Regardless of what you do with them, reinvest, spend, they are taxable. Unless, of course, you manage to fit into the 15% or lower marginal tax bracket in which case the tax rate on them would be 0%.

Information is more valuable sold than used – Fischer Black
Post Fri Oct 31, 2014 1:52 pm
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perdiempt
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Thank you. So this is why you recommended tax-efficient equity index funds for saving money when you are not eligible for tax-sheltered accounts like 401k, etc. I am learning.
Post Fri Oct 31, 2014 6:27 pm
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