How Long Do You Have to Wait Before Selling Stock?

There's no minimum time you must hold a stock, but there are good reasons not to sell quickly.
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When a stock price skyrockets shortly after you buy it, you might be hoping to cash in your gains immediately; if it tanks, you might want to get out while you still can. If so, there’s no Internal Revenue Service rules to stop you, because there’s no minimum holding period for stock. However, if you hold it for long enough, you’re rewarded with a lower income tax rate on any gains.

Counting Your Holding Period

Your holding period for the stock starts counting the day after you bought it and ends the day that you sell it. For example, if you buy stock on January 1 and sell it on January 30, your holding period is 29 days, because you count from the day after you bought it, January 2, through the day you sold it, January 30.

Holding Period Classification

If you hold the stock for more than one year, any gains count as long-term capital gains, and any losses count as long-term capital losses. Your net capital gains are taxed at lower rates -- between 0 and 20 percent -- rather than your ordinary rates, which as of 2013 can be as high as 39.6 percent. If you hold it for one year or less, the gains are short-term capital gains and the losses are short-term capital losses. Your net short-term capital gains are taxed at your ordinary income tax rate. So, if you’ve got a very profitable stock and you’ve held it for almost a year, for tax purposes you’re better off holding it for a few more days to get the long-term capital gains rate.

Gains on Sales

No matter how long you hold the stock, your gain on each transaction is figured the same way: what you sold the stock for minus what it cost you to acquire the stock. The cost of buying the shares includes transaction fees. When you’re selling, you subtract out the transaction fees from the proceeds. For example, say each trade you make costs you $9. If you buy stock priced at $1,000 and pay a $9 commission, you’re treated as paying $1,009. If you then sell it for $1,218 and pay another $9 trading fee, your proceeds are $1,209, which means your taxable gain is $200.

Calculating Net Capital Gains

If you’ve got some disappointments mixed in with your winners, you can use the losses to offset your gains. However, you have to follow the rules: First, offset your short-term losses against your short-term gains and your long-term losses against your long-term gains. So, if you have stocks that have gone down that you've held for almost a year and are planning to sell, it's generally better for tax purposes to sell them soon so they can be classified as short-term losses and offset your short-term gains. Then, if you have any excess losses in one category, you can use them to offset excess gains in the other. If you have more losses than gains, you can deduct up to $3,000 ($1,500 if you’re married but file separate returns) and carry the rest over to the next year.

For example, say you have $3,000 in short-term gains, $5,000 in long-term gains, $1,000 in short-term losses and $5,500 in long-term losses. First, offset the short-term losses against the short-term gains to find a net $2,000 short-term gain and offset the $5,500 in long-term losses against the $5,000 in long-term gains to find a net $500 long-term loss. Since your long-term losses exceed your long-term gains, you can use the extra $500 to offset your short-term gains, bringing your short-term gains down to $1,500 for the year.

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