If I Sell My Stock In Palantir, Do I Have To Pay Capital Gains Taxes?' – Suze Orman Says The Real Question Is 'Should You Sell?'

When a listener wrote to Suze Orman on the Women & Money podcast, her question wasn't just about capital gains taxes – it was about making a smart financial decision. Susan shared how she grew her investments from $0 to $350,000 in just two years and one standout stock in her portfolio was Palantir.

Susan bought Palantir at $16 per share, a move inspired by financial advice Orman had previously shared. With the stock now trading around $70, Susan wondered if selling would trigger capital gains taxes – and if there was any way to avoid them. Here's what Orman had to say.

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What Are Capital Gains Taxes?

Capital gains taxes apply when you sell an asset, like stock, for more than you paid. In Susan's case, if she sells Palantir at $70 per share after buying it at $16, she would realize a gain of $54 per share. The IRS taxes this gain based on how long you've held the stock.

• Short-term gains (held for one year or less) are taxed at the same rate as your ordinary income.
• Long-term gains (held for over a year) are taxed at lower rates – 0%, 15% or 20% – depending on your taxable income.

For investors like Susan, who have held Palantir for over a year, the long-term capital gains tax rate likely applies. Unfortunately, there's no way to completely avoid capital gains taxes if you sell.

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Orman's Take: "Should You Sell?"

Orman asked Susan to reconsider her strategy and stop thinking about the taxes. She said to determine whether selling Palantir is even the right move. She noted that Palantir could rise further, potentially reaching $85 or even $100, according to Keith Fitzgerald, a market expert she often references.

But she also emphasized the importance of managing risk. "Keith also has a rule," Orman explained. "Once you’ve doubled your money – in your case, from $16 to $32 – you should take those shares off the table." In Susan's case, this would mean selling enough stock to recoup her original investment and letting the remaining shares ride.

This approach protects the initial capital while allowing for further potential growth – essentially turning the rest of the investment into a "free trade."

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Options to Consider

Orman also offers some alternative strategies if holding her Palantir stock makes Susan uneasy: 

• Sell half: This reduces stock exposure while keeping a stake in its future growth.
• Reinvest profits: Susan could sell and use the proceeds to diversify her portfolio or buy into other promising investments.
• Wait for a dip: Selling now and waiting for Palantir’s value to drop could present a new buying opportunity.

Orman acknowledged her experience with Palantir, explaining that she and her wife, KT, have held significant shares despite several opportunities to sell. Their decision is based on their trust in the stock's long-term potential.

Key Takeaway

Ultimately, the question isn't just about capital gains taxes – it's about aligning financial decisions with your goals and comfort level. If Susan sells, she will owe taxes on her gains. However, as Orman points out, the bigger consideration is whether selling Palantir aligns with her overall investment strategy.

For investors in similar situations, it's important to weigh the benefits of cashing out against the potential for further growth. Consulting a financial advisor can also help tailor a plan for your circumstances.

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