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Update content.md #165

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Jan 21, 2022
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Expand Up @@ -62,7 +62,7 @@ Now, let's say you threw 100 USD of after-tax money into the aforementioned stoc

Federal long-term capital gains rules basically have [their own graduated tax](https://www.fool.com/research/capital-gains-tax-rates/). If it's less than 40,000 USD or so, you pay 0 percent in tax. Similar to the regular tax bracket if you do all the saving ever.

Basically, looking at it from an ethical social engineering perspective, the federal government is trying to incentivize long-term saving and investing through the tax code with things like tax deductions for putting cash into various savings vehicles, tax-free growth, and in the case of HSAs and the Roth Individual Retirement Account, tax-free withdrawals. Further, if you're living strictly on capital gains from various investments (retired), you can live a modest lifestyle without paying any taxes; the moment you go over that 40,000 USD point though, you pay 15% tax on the amount you went over. So, also incentivizing extravagance.
Basically, looking at it from an ethical social engineering perspective, the federal government is trying to incentivize long-term saving and investing through the tax code with things like tax deductions for putting cash into various savings vehicles, tax-free growth, and in the case of HSAs and the Roth Individual Retirement Account, tax-free withdrawals. Further, if you're living strictly on capital gains from various investments (retired), you can live a modest lifestyle without paying any taxes; the moment you go over that 40,000 USD point though, you pay 15% tax on the amount you went over. So, also disincentivizing extravagance.

And, let's say you purchased Stock A for 20,000 USD and Stock B for 20,000 USD. A year later Stock A is worth 70,000 USD and Stock B is worth 10,000 USD. Stock has a capital gain of 50,000 USD and Stock B has a capital loss of 10,000 USD. You sell both and get 80,000 USD. Based on Stock A alone, you'd owe 15 percent on 10,000 USD (9,999 USD really, but still). However, you should be able to take a tax deduction for the 10,000 USD capital loss from Stock B, which means you would pay 0 tax…depending on the type of account and presuming the initial 40,000 USD investment was done with post-tax money. Now the new 50,000 USD has been taxed and can't be taxed again, because the government can't tax the same dollar twice.

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