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# what do you have to earn short term to get the equivalent long-term gain?

Discussion in 'Taxes and Accounting' started by stockmarketbeginner, Jan 22, 2018.

1. ### stockmarketbeginner

Hello,

Suppose you are in the 30% income tax bracket, vs. a 15% capital gains tax bracket. Then:

For long-term capital gains tax, you need to earn 117.7 dollars to end up with 100 dollars after tax:
117.7(.85) = 100

For short-term trades with a 30% income tax rate, you need to earn 142.9 dollars to end up with 100 dollars after tax:
142.9(.7) = 100

This means you need to earn 142.9 vs. 117.7.
142.9/117.7= 1.21

So your percentage gain has to be 21% higher via short-term trading to match what you would get in a long term trade.

So if you could get 20% in a long term trade, you would have to get 20(1.21) = 24.2% gain in a short term trade to get the same amount after tax.

Is this concept correct?

The amount is higher, but not insurmountably so. This means if you see a good short term opportunity, the higher tax should not shy you away from taking it.

2. ### tommcginnis

Remember your probabilities -- one solid half of Expected Value.....

To wit:
Taxes are 100% going to come.
One dollar on debt reduction is 100% a dollar of Net Position improvement.

Earning money? Revenues? "Ewwwww."

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