Market milestones, proposed tax cuts, and more are making news today. Here's how it could affect your money:
The S&P 500 was close to a new record high Tuesday morning as traders cheered vaccine developments. The benchmark index had closed Monday just 0.97% from its February high.
Although it can feel like a disconnect when the stock market rallies amid grim economic news, remember that data like gross domestic product (GDP) recaps what has already happened. Meanwhile, traders and the market look months ahead and see reasons to remain optimistic.
During a briefing Monday, President Donald Trump said he was "looking very seriously" at new tax breaks, including a reduction in capital gains taxes and an income tax cut for middle-income families. It's unclear what those breaks might entail, but they could have an effect on your taxes next spring.
The share of people who made an IRA contribution was up 18% in the first half of 2020, compared to a year earlier, according to new data from Fidelity — and contributions were up 22%.
Video by David Fang
When you sell an investment for more than you paid for it, the difference is capital gains. Capital gains taxes on that profit depend on how long you have held an investment:
- If you hold a taxable investment for less than a year, you'll pay short-term capital gains rates, which is the same as your normal income tax rate.
- If you hold a taxable investment for one year or more, you'll pay a more favorable long-term capital gains rate of 0%, 15%, or 20%, depending on your tax bracket.
If you sell an investment at a loss, you can use those capital losses to offset capital gains and reduce your tax bill.
And although the daily news can have an impact on your wallet, remember to take a long-term outlook when it comes to decisions on spending, saving, and investing.
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