Yes, you will have to pay capital gain tax on the sale of ETF(sold for profit), which would increase your taxable income.
The holding period is the time in which you hold your shares. The holding period starts on the day after your purchase order is executed (“trade date”) and ends on the day of your sell order (also the “trade date”). The date you pay for the stock, which may be several days after the trade date for the purchase, and the settlement date, which may be several days after trade date for the sale, do not impact your holding period.
- If you hold ETF shares for one year or less, then gain is short-term capital gain.
- If you hold ETF shares for more than one year, then gain is long-term capital gain.
ETFs in tax deferred accounts: When you own ETFs in a tax-deferred account, such as an IRA, there is no immediate taxation on the sale. When funds are distributed from the account, all distributions are taxed as ordinary income, regardless of what holdings and transactions generated the funds.
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