To The Moon

$Amazon.com(AMZN)$

Is a stock split good?

Although it may appear that you've hit the jackpot when you hear about a stock split, it isn't as glamorous as it sounds. You'll receive additional shares of Amazon in your account but the overall value of your shares won't change.

Let's say you owned one share of Amazon stock valued at $3,000 before the split. After a 20-for-1 stock split, you now own 20 shares of stock that are worth $150 per share. The total value of all your shares will still be $3,000.

What you should know about taxes

Relax. I'm not about to throw thousands of tax considerations and forms at you. Stock splits are tax-friendly. Because you don't make any money from a stock split in itself, you don't have to cough up any money to the IRS.

Selling your shares may come at a cost

A stock split in itself won't require you to report any income on your tax return. However, selling Amazon stock before or after the split is a different story.

Let's say you buy a share of Amazon stock before the stock split. Your one share of stock turns into 19 additional shares because of the 20-for-1 stock split. If the stock goes up and you decide to pull the trigger and sell half your shares immediately following the split, you'll be on the hook for short-term capital gains taxes. Those tax rates can be as high as 37% if you're a high earner.

If you hang on to your shares for over a year before selling, you'll have a chance to unlock the long-term capital gains rates. Investors enjoy capital gains rates because they can get a deal on their tax bill. Below are the 2022 long-term capital gains rates in case you're thinking about pressing the sell button.