7. Taxes and Tax-Advantaged Accounts

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Taxes on investing depend on the country where you are tax resident. This chapter covers the US and the EU, the two places most readers are in. Figures are for 2026 and tax rules change often: always check the current rules with your tax authority or a tax advisor. This is general education, not tax advice.

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The four questions to answer for your country

How are profits from selling taxed? Is there a lower rate or an exemption after holding for a certain time?
How are dividends taxed? Is tax already withheld in the company's country?
What do I have to report on my tax return, and when?
Which tax-advantaged accounts exist? Special accounts that give tax benefits for long-term or retirement investing.

United States (2026)

Short-term vs long-term gains

Sold after 1 year or less: taxed as ordinary income, at the same rate as your salary.
Sold after more than 1 year: taxed at the lower long-term rates of 0%, 15% or 20% (Schwab).

This is one of the biggest reasons long-term investing pays off in the US.

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2026 long-term capital gains brackets (taxable income) (Schwab)

Rate	Single	Married filing jointly
0%	up to $49,450	up to $98,900
15%	$49,451 to $545,500	$98,901 to $613,700
20%	above $545,500	above $613,700

Net Investment Income Tax (NIIT): an extra 3.8% on investment income if your modified adjusted gross income is above $200,000 (single) or $250,000 (married filing jointly) (IRS).

Losses: capital losses offset capital gains. If losses are bigger than gains, up to $3,000 a year can be deducted from ordinary income, and the rest carries forward to future years (Schwab).

Wash sale rule: if you sell at a loss and buy the same or a substantially identical investment within 30 days before or after the sale, you can't claim that loss at that time (IRS Publication 550).