Today is one of those days where market volatility really rears its ugly head. As I’m typing this, the S&P 500 is down over 2% for the day. Days like this can cause anxiety in most investors and that worry is amplified by the world around us, especially as we head into a mid-term election. Election season has a way of turning steady investors into sudden decision-makers that lose focus of their long-term goals. One day you’re sitting on stocks you’ve owned for years. The next day a poll drops, a speech lands, or the results come in, and you hit sell. Or you sell, regret it two weeks later, and jump back in. The market moves fast. The tax bill shows up months later on your return, and that’s when a lot of people get surprised. Let’s walk through what actually happens on the tax side when election nerves drive trading.
Sudden Decisions Can Be Costly
If you’ve owned a stock or fund for more than a year and sell it at a profit, that profit is a long-term capital gain. The long-term capital gains rates are still the friendly ones: 0%, 15%, or 20%, depending on your total income. For 2026, married couples stay in the 0% bracket up to about $98,900 of taxable income and hit the 20% rate only once they clear roughly $613,700. Higher earners can also get hit with the extra 3.8% net investment income tax bringing their long-term capital gains rate to 23.8%, which is still much lower than their possible ordinary rate of 40.3%.
The election doesn’t change those rates. If you lose focus, what changes is the timing of when and how much tax you will pay. Selling a big winner right after the election locks that gain into this year’s tax return. Suddenly that money gets stacked on top of your regular income and can push you into a higher bracket or trigger the extra 3.8%. A gain that felt like a smart political move can turn into a real tax hit.
If the stock had only been held for a year or less, the gain gets taxed at ordinary income rates—which are usually higher. Same dollar profit, bigger tax bill.
Basis Matters
Your taxable gain is just sale price minus basis. Basis is usually what you paid for the security, with some possible adjustments for items like reinvested dividends. When you sell in the heat of the moment, you may not have considered the gain or have good records of the basis. It is advisable to keep your own records. Know what you paid, when you bought it, and any adjustments along the way. This can help ensure you pay no more tax than required.
Also, selling to reset basis is a tax strategy in which an investor sells securities (typically in a taxable account) and then repurchases them after a period of time (wash-sale rules), establishing a new cost basis equal to the repurchase price.
For appreciated holdings, this is often done in a year when the investor is in a low (or 0%) long-term capital-gains bracket: the sale realizes the gain at a favorable rate, and the new, higher basis reduces taxable gains on any future sale. Because the wash-sale rule applies only to losses, there is no waiting period required when harvesting gains.
The same idea can also appear in tax-loss harvesting—selling a position at a loss to realize the loss and then buying a similar (but not substantially identical) security or waiting 31 days to rebuy the same one—so the new, lower basis reflects the current market price. In both cases the goal is to adjust the tax starting point of the position for future planning while remaining invested.
What If I Change My Mind
Sometimes people sell right after the election, watch the market bounce, and decide to buy the same (or nearly the same) shares back a couple of weeks later. If that happens inside the 30-day window before or after the sale, the wash-sale rule kicks in. Any loss gets disallowed for this year and added to the basis of the new shares instead. The loss isn’t gone—it just gets delayed. Brokers only catch the ones they can see inside the same account, so cross-account are on you to track. It’s a real issue, but it’s secondary to the bigger question of whether the original sale was worth the tax cost in the first place.
Keep Focus Even When You Don’t Have Control: A Few Practical Things to Keep in Mind
- Don’t let election nerves be the only reason you realize a big long-term gain.
- Before you sell a long-held winner, calculate the tax hit using this year’s brackets and the possible extra 3.8%. A modest market move might not be worth it.
- Double-check basis and holding period before the trade. Older shares and transferred accounts are where most reporting mistakes hide.
- When the 1099-Bs arrive, review them. Make sure that basis is reported for all sale transactions and the basis is correct for any that you’ve tracked separately.
- If you sold at a loss and later want back in, wait at least 31 days or pick something similar but not identical.
- Remember why you are invested the way you are
Election-driven trading is rarely pure strategy. Feelings run high, and the story changes fast. The tax rules don’t care about the polls. Gains become taxable the year you take them, basis decides how big those gains are, and the Form 1099-B puts the whole thing in writing for the IRS. A deliberate plan instead of pure reaction can keep an election-year decision from turning into a multi-year tax headache.
At LeConte Wealth, we can be by your side to answer questions and help you make prudent investment decisions regardless of what is going on in the world around you.
