how an unrealized gain works
an unrealized gain occurs when the current price of a security is higher than the price the investor initially paid for the security including any fees associated with the purchase many investors calculate the current value of their investment portfolios based on unrealized values in general capital gains are taxed only when they are sold and become realized investors may choose to sit on unrealized gains for tax benefits most assets held for more than one year are taxed at the long term capital gains tax rate which is either 0 15 or 20 depending on one s income 1 assets held for one year or less are taxed as ordinary income with rates ranging from 10 to 37 12in 2022 a single filer making 41 675 will pay 0 on realized long term capital gains and an individual making 459 750 will pay only 15 3 that single filer pays 0 if they make 44 625 while the 15 rate is applied to a single filer earning 492 300 in 2023 4 if those same people held their investments for one year or less their realized gains would be taxed at the 22 and 35 rates respectively 2an investor may also choose to wait to sell investments if gains realized late in the year would place them in a higher tax bracket and thus increase their tax burden that investor may be better off waiting until january to sell at which point they can incorporate that profit into their tax plan for the year 