Money Talks News may earn commission or revenue through links in the content below. Our editorial team independently selects all products. Compensation does not influence our recommendations.
“Never fear the tax man, fear the losses.”
That was Jim Cramer’s verdict on the Oct. 21 episode of CNBC’s “Mad Money,” when a viewer asked whether to sell a winning stock now or hold it long enough to get long-term capital gains treatment, according to 24/7 Wall St. and TheStreet (1)(2).
He added, “If stocks can go down, take some off the table even if you have a big gain.” (1)
I’ve been a CPA since 1981, and over the years, I’ve made millions in stocks. So I’ve lived this question from both sides: the guy watching the stock and the guy filling out the tax return.
Cramer is mostly right. But “never” is a big word, and I’d bet the tax difference is bigger than a lot of retirees think.
Here’s the rule. Hold an investment more than one year and your gain is long-term. Hold it a year or less and it’s short-term, taxed as ordinary income at your regular rates, according to the IRS (3).
Most long-term gains are taxed at 0%, 15% or 20% (3). For 2026, the 0% rate applies to taxable income up to $49,450 for single filers and $98,900 for married couples filing jointly, according to Kiplinger and TheStreet (4)(2).
Here are 4 things to know before you take Cramer’s advice.
1. Where he’s right: Don’t trade a big loss for a small tax break
Say you own $50,000 of a stock with a $20,000 gain, and you’re a few months short of the one-year mark. Let’s also say your gain would be taxed at 22% as short-term and 15% as long-term.
Sell now, and the tax is $4,400. You keep $45,600.
Wait, and suppose the stock falls 10% before you hit a year. Now it’s worth $45,000, your gain is $15,000, and the 15% tax is $2,250. You keep $42,750. Waiting to save on taxes cost you $2,850.
To be fair, if the stock holds steady, waiting saves you $1,400. But a drop of just over 3% wipes that out.
That’s Cramer’s point, and it’s a good one. I’ve put risk ahead of taxes myself.
I bought Nvidia during the pandemic with roughly $10,000, then sold half in 2025 for about $115,000 in profit and kept the rest. I had to pay taxes on the gain, but taking risk off the table mattered more than squeezing out every last dollar.
2. Where he’s wrong: In the 0% bracket, waiting can erase the tax
Now flip it. Picture a retired couple with taxable income well under $98,900, sitting on a $20,000 short-term gain.
If their ordinary rate is 12%, selling now costs about $2,400. If the gain turns long-term and their total taxable income, including the gain, stays within the 0% bracket, the federal tax on it can be zero (3)(4).
When you’re just a few weeks from the one-year mark and the stock isn’t wobbling, that’s real money to give up. Any part of the gain that pushes you over the threshold gets taxed at 15% instead.
Figuring out which side of that line you’re on, and when to sell, is exactly the kind of decision where a second set of eyes pays off.
One option: Advisor.com offers a free matching service that pairs you with a fiduciary financial advisor, legally required to put your interests first. A good advisor can help with tax planning, investment decisions and Social Security strategies.
It’s built for people with $100,000 or more in investments. Get matched with a fiduciary advisor free.
One thing before we keep going — the financial world is louder and dumber than ever. Hot takes everywhere. Almost none of it is worth your time. I’ve spent 35+ years cutting through the noise so you don’t have to. Sign up for the free Money Talks Newsletter — 10 seconds, no spam, just the stuff that matters.
3. Inside an IRA, Cramer’s rule is right on the money
Amounts in a traditional IRA, including earnings, generally aren’t taxed until they’re distributed to you, according to the IRS (5). So selling a winner inside the account doesn’t trigger a capital gains bill.
Instead, the tax comes when you take money out of a traditional IRA, no matter how long you held the stock (5).
If that’s where your stock lives, ignore the one-year clock completely. Cramer’s “fear the losses” is the rule that matters there.
4. Losses still have value
If you do sell at a loss, it isn’t wasted. When your capital losses exceed your gains, you can deduct up to $3,000 of the net loss a year ($1,500 if married filing separately) and carry the rest forward to later years, according to the IRS (3).
And if a big short-term gain left you with a tax bill you weren’t ready for, don’t ignore it.
Ignoring a $5,000 IRS tax bill can quickly snowball into a $10,000 nightmare with penalties, interest, and asset liens.
If you find yourself in that situation, you don’t have to face the IRS alone. Compare your top tax relief options now to find expert help.
My honest take
I’d put it this way: Fear the losses first, but don’t ignore the tax man entirely.
If you’re in a high bracket and the stock makes you nervous, sell and pay the tax. A tax bill means you made money. A loss means you didn’t.
But if you’re a retiree in the 0% zone and the calendar is almost on your side, check the math before you hit the button. Especially if the stock is stable.
Smart investors don’t dodge taxes at all costs. They just know exactly why they’re paying them.
Sources: 1. 24/7 Wall St.; 2. TheStreet; 3. IRS; 4. Kiplinger; 5. IRS
Add a Comment