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.
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.
@jad56061 Thanks for the question!!
Ahh ok so follow up, if I earned 20,000 for my investments, is that what is taxed how much I earned? Or is it based on how much I paid for it vs. how much it is now? Example like a share in Apple I bought for $100 in 2020 but now its worth $200. I would only pay $100 of the difference correct?
Correct. If you purchased the stock at $100 and sold it for $200, you would have a $100 taxable gain.